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ON

TOP OF THE

CLOUD

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ON

TOP OF THE

CLOUDHow CIOs Leverage New Technologies

to Drive Change and Build Value across

the Enterprise

HUNTER MULLER

John Wiley & Sons, Inc.

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Copyright # 2012 by Hunter Muller. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

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Library of Congress Cataloging-in-Publication Data:

Muller, Hunter

On top of the cloud: how CIOS leverage new technologies to drive change and

build value across the enterprise/Hunter Muller.

p. cm.

Includes index.

ISBN 978-1-118-06582-2 (hardback); ISBN 978-1-118-21443-5 (ebk);

ISBN 978-1-118-21454-1 (ebk); ISBN 978-1-118-21458-9 (ebk)

1. Information technology—Management. 2. Technological innovations—

Management. 3. Cloud computing. 4. Chief information officers. I. Title.

HD30.2.M8495 2012

658 0.0546782—dc23 2011038803

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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For Sandra, Chase, and Brice

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CONTENTS

Foreword xi

Preface xv

Acknowledgments xxiii

Introduction xxvA New Business Model xxvii‘‘Thoughtfully Progressive’’ xxviii

Part I: Transformational Leadership 1

Chapter 1 The Rising Tide 3The CIO as Rock Star 6Real Stories from Real IT Leaders 7Learning from Listening 8More Than Technology 9The Real Challenge Is Organizational 9Leadership Is Essential 12

Chapter 2 IT Does Matter 17Stay Focused on Delivering Value 20Replacing the Perpetual Pendulum 22Driving the Innovation Agenda 24It’s All a Question of Perspective 28

Chapter 3 The Engine of Innovation 31Bringing Innovation to the Surface 36Incentivizing Innovation 39

vii

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Chapter 4 Finding the Right Balance 45Winds of Change 49The Third Bucket 51The Closer 53Outside versus Inside 55Articulating the Value of Technology 57

Chapter 5 The Customer-Focused CIO 61Top Line or Bottom Line? 65Driving Business Growth 66The Rapid Enabler 68Own, Rent, or Both? 72Multiple Models 75Also Consider the User Experience 76

Chapter 6 To Cloud or Not to Cloud 79Fail Fast, Fail Cheap 83A Skunk Works in the Cloud 85Weaving the Seamless Tapestry 87

Part II: Driving Change 91

Chapter 7 In Front of the Firewall 93Avon Calling 100When the Model Fits 103

Chapter 8 The New Speed of Change 107Updating the Mental Model 115Innovation under Pressure 119The Cloud on Wheels 121Campaigning in the Cloud 122

Part III: Building Value 127

Chapter 9 Pushing the Envelope 129Two Sides of the Same Coin 138A Multiplicity of Clouds 142Turn of the Tide 146Translating ‘‘Speeds and Feeds’’ into Cash Flow 152

viii CONTENTS

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Chapter 10 Entering the Cloud 155Governance Is Fundamental to Success 161Due Diligence 163Taking ‘‘No’’ Off the Table 173

Afterword 179

Meet Our Sources 189

Recommended Reading 221

About the Author 225

About HMG Strategy LLC 227

Index 229

CONTENTS ix

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FBETW 11/17/2011 12:25:16 Page 11

FOREWORD: THE FOUR HORSEMEN

I think it’s safe to say that cloud computing is emerging from a

period of chaos and entering an era of increasing standardiza-

tion and stability.

That doesn’t mean the cloud is fully mature, but it does ap-

pear to be heading in that general direction.

Why do I believe the cloud is evolving toward maturity?

There are several reasons.

First, I believe that a dominant design for the cloud has al-

ready emerged. Almost every new technology undergoes a

chaotic period of rapid development, followed by the emer-

gence of a dominant design—a set of de facto standards.

For example, when the railways were initially constructed,

there was little agreement on how wide apart to place the tracks.

Each railway company had its own gauge, its own standards.

Eventually, the companies settled on a single standard gauge.

Sometimes an innovative design is so powerful and so com-

pelling that it becomes an icon of the new standard. The Model

T Ford is a classic example. A more recent example is the iPod.

For the cloud, this phenomenon is represented by what I

call ‘‘the four horsemen of dominant design.’’ The four horse-

men are:

1. Servers

2. Network

3. Storage

4. Software

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FBETW 11/17/2011 12:25:16 Page 12

The following table shows the dominant standards emerg-

ing in each of the four areas:

Servers x86 architecture

Network Internet (IP/TCIP)

Storage Solid state (SSD)

Software Software-as-a-Service (SaaS)

These ‘‘four horsemen’’ are the pillars of cloud infrastructure.

They are also becoming the lingua franca of a new era in which

the interplay between technology and the consumers of tech-

nology becomes much more focused on delivering value.

The emergence of a dominant design for cloud computing

will likely enable a fundamental shift in information technol-

ogy (IT) strategy. This shift will inevitably create challenges

and opportunities.

Unlike most of our proprietary legacy systems, the cloud is

a ‘‘tap into’’ technology. The ‘‘tap into’’ model is very different

from the model we’ve grown accustomed to managing. As a

result, IT leaders will be required to develop new skills and

new capabilities. We will need to assume a more proactive

leadership role in helping our companies make the most of

the cloud’s potential.

Throughout our history, FedEx has been focused on mak-

ing connections, all over the world. It’s the core of our busi-

ness. That’s one of the many reasons we find the cloud

exciting—because it’s a platform for making connections on a

much larger scale than was imaginable in the past.

To me, the cloud represents the future. Here’s a quick story

illustrating why I feel this way: We were on a family vacation

in the countryside. We had downloaded an app onto my

xii FOREWORD: THE FOUR HORSEMEN

FBETW 11/17/2011 12:25:16 Page 13

digital tablet that enabled us to identify the stars in the night

sky. Because the tablet has a cellular GPS, the app knows

where I am. It can even tell which direction of the sky I’m

pointing the tablet and the angle I’m holding it. Then it lights

up a map of the sky, showing the stars and constellations.

Naturally, my kids love it.

And while we’re playing with the app and looking at the

stars, I’m thinking, ‘‘All of the data resides somewhere else,

and all of the calculations are being performed somewhere

else. And I’m tapping into all that technology capability from

the middle of a field.’’

The utility and potential of cloud computing seem virtually

unlimited. Like emerging technologies of the past, the cloud is

evolving from an early state of chaos into a state of greater

maturity and stability. Now it’s up to us, as leaders and execu-

tives, to devise practical strategies for leveraging the cloud’s

potential as a platform for innovation and success.

Robert B. (Rob) Carter

Executive Vice President of FedEx

Information Services and

Chief Information Officer of FedEx Corp.

FOREWORD: THE FOUR HORSEMEN xiii

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PREFACE

What’s Really New about the Cloud?

It seems to be a recurring phenomenon: I finish the manu-

script for a book and I am ready to send it to my publisher.

Then I find additional sources with fresh insights and great

ideas. I call my editor, he growls at me, and we agree to

extend the deadline so we can include the new material.

It happened with my first book, The Transformational CIO,

and it happened with this book. Days before finalizing the

manuscript, I was fortunate to secure interviews with three

top thought leaders at IBM—Leslie Gordon, vice president,

Office of the CIO, Application and Infrastructure Service Man-

agement; Jim Comfort, vice president, Integrated Delivery

Platforms, Cloud Computing; and Lauren States, vice presi-

dent, Enterprise Initiatives, Cloud Technology and Client In-

novation, IBM Strategy.

Now my only problem was figuring out where to put their

comments in the book. Fortunately, the solution to that prob-

lem became apparent almost immediately. The wisdom and

insight that Leslie, Jim, and Lauren shared with me were so

valuable that I knew they had to go right here, at the front of

the book.

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‘‘Cloud puts power in the hands of the end user, andthat can lead to a better financial equation for ITbecause of higher adoption rates and less under-utilization of resources. Cloud is changing the way weconsume IT, and we’re only at the beginning.’’

My conversations with these brilliant people covered a

wide range of topics, but the main question I put to each of

them was this: What do you say to someone who tells you

there’s nothing new about the cloud?

Here’s a summary of their responses:

Leslie Gordon

Internally, we leverage cloud as an extension of existing

strategy. From a technology perspective, it’s not dramatically

new. It’s grounded in a lot of the same technologies that we

already use. I see cloud as a natural turn of the crank. It’s an-

other abstraction of IT services, the next generation following

virtualization and optimization of the infrastructure.

The cloud is not a one-size-fits-all solution, and it is not a

panacea. You have to ask yourself, ‘‘Where does this approach

fit in my organization? Where will it help me extend my strat-

egy?’’ When you look at cloud from this perspective, it repre-

sents both an opportunity and a challenge.

One of the opportunities we identified early on was develop-

ment and testing. We intentionally began in a low-risk area so

we could really explore the potential of this new approach. It’s

proven to be a strong success. Now our developers can create

and access test environments on demand, whenever they’re

xvi PREFACE

FPREF 11/04/2011 13:33:39 Page 17

ready, and wherever they are in the world—without engaging

the test-build organization. We’ve taken the middleman out of

the equation and enabled our developers to become more agile

and productive.

We’ve also received tremendous positive feedback from our

developers, and they’ve driven very high adoption of this new

approach. The flexibility, speed, and freedom to do what they

want really appeals to them.

We’ve also identified business analytics and storage virtual-

ization as prime opportunities for using cloud, and we see

strong potential in both areas. We’ve already used cloud to

provide common BI services that can be applied to a large set

of data warehouses. Taking that step has enabled us to ana-

lyze information more effectively, which is very valuable from

a business perspective.

What’s cool about cloud isn’t the technology. What’s really

cool about cloud is how it changes the way people consume IT.

Cloud puts power in the hands of the end user, and that can

lead to a better financial equation for IT because of higher

adoption rates and less underutilization of resources. Cloud is

changing the way we consume IT, and we’re only at the

beginning.

Jim Comfort

The genuinely transformational aspect of the cloud is on the

user side . . . the people who use IT. The cloud is about ena-

bling developers to become five times more productive. It’s

about responding to market demand in hours or minutes,

and not days, weeks, or months.

It’s difficult for most CIOs to quantify those kinds of benefits.

Most CIOs are great at quantifying what’s going on in the IT

shop. And that is the conundrum. The discussion rapidly

becomes a very detailed conversation about nuts and bolts,

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FPREF 11/04/2011 13:33:39 Page 18

speeds and feeds. CIOs are comfortable having these conversa-

tions. But when you talk about the cloud at that level, it’s hard

to see its value.

The fundamental abstraction of cloud is separating what

from how. Separating what the user is trying to accomplish

from how the underlying technology works.

Once you’ve made that separation, you can focus on the

user. You can start asking, ‘‘What is the user’s role? What is

this user trying to do? What can we do in IT to make this user

more productive?’’

You aren’t giving users infinite choice, you’re giving users a

range of choices that will help them become more productive.

That’s how you leverage cloud on the user side, by increasing

labor productivity.

On the IT side, you leverage cloud by reducing costs and

complexity. You build a service catalog that is efficiently con-

strained, standardized, and automated. Users get a range of

choice that helps them become more productive, and IT gets

lower costs and less complexity.

Now you are bridging two worlds, you are connecting IT

and the business in a way that makes sense to both sides of the

equation. That is the CIO’s role during this transformational

period: building bridges between IT and the other parts of the

company. The cloud can help you build those bridges, which

are essential to the company’s long-term health.

‘‘The fundamental abstraction of cloud is separatingwhat from how. Separating what the user is tryingto accomplish from how the underlying technologyworks.’’

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Lauren States

I think the prime focus should be on new business opportunities

where the flexibility and speed-to-market advantages of the

cloud delivery model can really bring value to the company.

We can argue about the technology itself all day long. Most

of it is evolutionary. But I’ve seen it mature to the point where

we can do things with it that we couldn’t do before.

Virtualization is not an enabler for the business. The cloud,

on the other hand, enables new business models. That’s a big

difference. It’s not the technology that’s revolutionary—what’s

revolutionary are the new ways we can apply the technology.

Where do you begin? Start by looking at your business pro-

cesses, applications and workloads. Find out where it makes

sense to move services into the cloud. And of course, you’ve got

to consider data privacy, security, regulations, compliance,

standards, tolerance for risk, governance, and all those re-

quirements that are specific to your organization.

You’ll have to negotiate with the cloud provider to make

sure you get the service level agreements (SLAs) you’ll need to

deliver secure and reliable services to your end users, whether

they are internal or external customers.

Some of the organizations we work with are moving into

the cloud because of the economic benefits it can deliver in

terms of reduced costs and added capabilities. Others see the

cloud as a way to create new business services they can take to

market and monetize. Those companies are saying, ‘‘With

cloud, we can leverage our infrastructure and our technology

to provide services to new customers and new markets.’’

In either case, you will need a new mix of skill sets in IT.

Which skills will be important? Architecture, contract negotia-

tion, governance, customer service, to name a few.

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FPREF 11/04/2011 13:33:39 Page 20

I recently saw a tweet listing the five stages of cloud adop-

tion: denial, anger, bargaining, depression, and acceptance.

I have it posted on my wall. It’s funny, but it also reminds me

that different people view the cloud differently. Most people are

still in the earliest stages of adoption, and that’s something you

have to accept.

Personally, what I like best about the cloud is that I can

carry it around in my handbag. The cloud delivers banking,

shopping, reading, playing games, managing credit cards,

talking to my family, communicating with work, building my

professional network—all through mobile devices and all

without me having to understand the many technologies be-

hind it. That’s really exciting.

I think this is driving toward a tipping point in IT, to a place

where we can be much more productive and more flexible

than ever before. I think this will be bigger than the transition

from mainframes to client-servers, because this will enable us

to do more—as companies, as consumers, and as a culture.

For IT professionals, this opens up the possibilities of creating

whole new sets of applications that are more collaborative,

more data-intensive, more available, more networked, and

much easier to use. Today, we’re getting a glimpse of the fu-

ture. We don’t know how the story ends, but it’s very exciting.

‘‘Personally, what I like best about the cloud is that Ican carry it around in my handbag. The cloud deliversbanking, shopping, reading, playing games, managingcredit cards, talking to my family, communicating withwork, building my professional network—all throughmobile devices and all without me having to under-stand the many technologies behind it.’’

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After my conversations with Leslie, Jim, and Lauren, I

came away with a much stronger belief that the cloud is

revolutionary in a business sense. The cloud will enable a

new generation of business models—that seems perfectly

clear. The fact that cloud computing is merely ‘‘evolutionary’’

from a pure technology perspective does not diminish its

overall impact or lessen its potential as a transformational

force. At the very least, it is another arrow in the CIO’s

quiver.

I was also deeply impressed by their shared insight about

the cloud’s impact on the role of the CIO. At minimum, the

cloud’s presence will require CIOs to develop new skill sets,

whether or not they actually use cloud-based services. CIOs

who do not acquire these new skills will likely find them-

selves at a competitive disadvantage as cloud services be-

come more the new norm.

Leslie, Jim, and Lauren also mentioned a possibility that I

hadn’t previously considered, namely, the potential of cloud

computing to serve as a template for managing an increas-

ingly virtualized portfolio of IT capabilities. In other words,

the cloud can become the model for the next generation of IT

management. That, from my perspective, certainly makes the

cloud worthy of deeper exploration.

As most of you already know, IBM is a major participant in

the emerging cloud economy. IBM has publicly stated that the

cloud is one of four key growth initiatives in its 2015 Road-

map. So far, the cloud has surpassed the company’s expect-

ations as a revenue engine. The company expects the cloud

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to play an important role in achieving its 2015 operating earn-

ings per share (EPS) target of $20.

IBM’s confidence in the ability of the cloud to deliver sig-

nificant revenue isn’t based on wishful thinking—as a cloud

user, the company genuinely understands the value and the

potential of the cloud as a fundamentally new model for ena-

bling business transformation in rapidly changing markets.

In summary, what’s new about the cloud isn’t how it

works, but what it enables us to achieve.

xxii PREFACE

FACKNOW 11/17/2011 12:31:9 Page 23

ACKNOWLEDGMENTS

The contents of this book are based primarily on the deep

knowledge and wide experience that I acquired over nearly

three decades as a consultant in the IT industry. But this book

also represents several years of persistent research, involving

dozens of interviews. I could not have completed On Top of

the Cloud without leveraging the collective wisdom of many

knowledgeable sources. I thank them sincerely for their time,

their energy, their intelligence, and their support.

I am especially grateful to Rich Adduci, Ram�on Baez, Becky

Blalock, Mike Blake, Brian Bonner, Greg Buoncontri, Rob

Carter, Trae Chancellor, Nicholas Colisto, Jim Comfort,

Barbra Cooper, Tim Crawford, Martin Davis, Greg Fell, Matt

French, Stephen Gold, Leslie Gordon, Allan Hackney, Kim

Hammonds, Tyson Hartman, John Hill, Mark Hillman, Donagh

Herlihy, Michael Hubbard, Randy Krotowski, Tony Leng,

David Linthicum, Tod Nielsen, Bert Odinet, Tom Peck, Steve

Phillips, Steve Phillpott, Mark Polansky, Tony Scott, Esat

Sezer, Dave Smoley, Randy Spratt, Lauren States, Pat Toole,

Clif Triplett, and Joe Weinman.

While researching and writing this book, I received in-

valuable assistance and ongoing support from my colleagues

at HMG Strategy, Amanda Vlastas, Kristen Liu, Cathy Fell, and

Melissa Marr.

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FACKNOW 11/17/2011 12:31:9 Page 24

I also extend my sincere thanks to Sheck Cho and Stacey

Rivera, my editors at John Wiley & Sons, who had faith in the

value of the project and were patient when I missed my dead-

lines. Kudos to Chris Gage and his production team for pro-

ducing a book that is user-friendly and looks great.

I owe a special debt of gratitude to Mike Barlow, the co-

author of Partnering with the CIO (Wiley, 2007) and The

Executive’s Guide to Enterprise Social Media Strategy (Wiley,

2011). Mike served as project manager for On Top of the

Cloud, and his guidance was truly invaluable. In addition to

being a talented writer and editor, Mike is a genuinely nice

guy. Thank you, Mike!

Most of all, I want to thank my wife, Sandra, and our two

sons, Chase and Brice, who put up with long nights of writ-

ing, endless phone calls, and lost weekends of heavy editing.

xxiv ACKNOWLEDGMENTS

CINTRO 11/14/2011 16:8:11 Page 25

INTRODUCTION

Many of the great things in the history of our civiliza-

tion have been achieved by the independent will of

a determined soul. But the greatest opportunities

and boundless accomplishments of the Knowledge

Worker Age are reserved for those who master the art

of ‘‘we.’’

—Stephen R. Covey, from the foreword of the 2004

edition of The 7 Habits of Highly Effective People

About three years ago, I began writing about the convergence

of three major technology trends that I believed would radi-

cally transform the role of the modern CIO.

The trends were cloud, mobile, and social computing—in

that order.

Today, I would add advanced business analytics to the mix

of converging trends. And I might subtract the cloud.

Why remove the cloud? Well, I don’t think it’s fair to call the

cloud a trend any more. The word ‘‘trend’’ suggests a kind of

impermanence. Despite its vaporous name, cloud computing

has solid foundations. It is no longer mostly hype or fiction.

The cloud is real. It is a fact of life.

xxv

CINTRO 11/14/2011 16:8:11 Page 26

Gartner, the world’s leading information technology (IT)

research and advisory company, wrote in 2011 that ‘‘almost

half of all CIOs expect to operate the majority of their applica-

tions and infrastructures via cloud technologies.’’

If we accept that cloud computing is here to stay, then it

makes sense to get a firm grasp on what the cloud is and

what it isn’t.

‘‘Almost half of all CIOs expect to operate the majorityof their applications and infrastructures via cloudtechnologies.’’

What it isn’t is the end of IT. Why? Because the cloud is just

another form of IT. As you know, IT technology tends to be

additive. For example, when companies began using client-

server technology, mainframes didn’t suddenly vanish. The

same thing happened when companies started buying PCs—

they didn’t throw away their client-server platforms. Some

processes run better in mainframe environments, some pro-

cesses run better in client-server environments, and some

processes run better in desktop environments.

Part of the CIO’s role is helping people figure out which

technologies and which platforms do the best job of deliver-

ing the results that people need to achieve their business

objectives.

Clearly, there are some parts of your IT portfolio that you

will probably never put into the cloud. And there are some

xxvi INTRODUCTION

CINTRO 11/14/2011 16:8:11 Page 27

parts of your IT portfolio that you will happily send into the

cloud.

So the big question isn’t: Will you or won’t you use the

cloud? The big question is: What will you use the cloud for?

A New Business Model

Many of my friends and colleagues have expressed sincere

skepticism over the cloud. Typically, they say the following:

‘‘The cloud is not new technology.’’

‘‘Most of the cloud is hype.’’

‘‘The cloud will never provide the security we need.’’

To be fair, most of what they say is true—to a certain extent.

Two foundational elements of the cloud—virtualization and

networks—have been around for many years. So it’s fair to

say that a large chunk of cloud technology is not new.

I’m not really in a position to judge whether the cloud will

live up to the hype surrounding it. Only time will tell. In today’s

media-rich culture, all new things are accompanied by irritating

amounts of hype, and the cloud is no different. Suffice it to say

that some of the hype is legitimate and some of it isn’t.

Concern about the security of data in the cloud is mostly

valid, but it assumes that the cloud in question is the public

cloud and not a private cloud. We’ll talk more about the differ-

ences among public, private, hybrid, and community clouds

later on. For the moment, let’s agree on two points. First,

INTRODUCTION xxvii

CINTRO 11/14/2011 16:8:11 Page 28

security is a relevant issue. Second, the type of cloud matters

because some types offer more security than others. So making

blanket statements about cloud security is like saying ‘‘I don’t

like laptops because of the security issues they pose.’’

Despite the uncertainty around the cloud, I am sure of one

thing: The reason for learning about the cloud isn’t because it

represents a phenomenal new technology. The reason for

learning about the cloud is because it represents a phenome-

nal new business model.

My instinct tells me that a lot of business leaders have al-

ready figured this out. And there lies the danger for the CIO:

If you don’t get on top of the cloud, the business will go

around you and develop its own cloud strategy.

It’s happened before, and it can happen again. Personally, I

would prefer to see CIOs leading the charge.

‘‘Thoughtfully Progressive’’

My friend John Hill is not a wide-eyed optimist. He’s smart,

thorough, and rational. He is a former chief technology officer

at Siemens, the global electronics and electrical engineering

powerhouse.

‘‘Most of us are inherently conservative and resistantto change. So we need to make a conscious effort totest the cloud, try it out, and find out where the bene-fits really are.’’

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When I asked him to describe the best way for CIOs to ap-

proach the cloud, he paused for a moment before saying,

‘‘Thoughtfully progressive.’’

Not surprisingly, John’s take on the cloud is . . . thoughtful

and progressive. Here’s what he told me:

The cloud is similar to other parts of the IT landscape. The real

issue isn’t the availability of the technology. The real issue is

the availability of skills and knowledge. For CIOs, that means

doing pilot programs and allocating resources to evaluate the

practical benefits of the cloud.

Most of us are inherently conservative and resistant to

change. So we need to make a conscious effort to test the

cloud, try it out, and find out where the benefits really are.

Now isn’t the time to bet the farm; now is the time to build

skills and knowledge.

We’ll hear more from John in subsequent chapters. He is

one of many CIOs who generously shared their thoughts,

insight, and wisdom with me as I wrote On Top of the Cloud.

Essentially, this book is a collection of stories about smart, tal-

ented, and experienced CIOs who are trying to figure out the

best ways to take advantage of the cloud and make it work for

their organizations. I invite you to read their stories and learn

from their experiences.

INTRODUCTION xxix

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ON

TOP OF THE

CLOUD

C01 11/14/2011 13:46:36 Page 1

Part I

TransformationalLeadership

C01 11/14/2011 13:46:36 Page 2

C01 11/14/2011 13:46:36 Page 3

Chapter 1

The Rising Tide

C01 11/14/2011 13:46:36 Page 4

C01 11/14/2011 13:46:36 Page 5

Compared to the roles of other executives in the modern

enterprise, the role of the chief information officer (CIO)

has evolved quite dramatically over the past two decades.

In terms of status, the CIO has been elevated from a junior

partner to a senior partner in the enterprise leadership circle.

The CIO has a ‘‘seat at the table’’ and is considered a true

member of the C-suite.

Status is often a matter of perception, however. What’s re-

ally changed is the scope and breadth of the CIO’s responsi-

bilities. Let’s turn the clock back 20 years. In those days, the

CIO was the person responsible for keeping information tech-

nology (IT) systems running. The CIO’s primary responsibility

was making sure that IT did its job. Since a significant chunk

of IT was devoted to maintaining back-office systems, the CIO

was invisible to most of the enterprise.

The arrival of ERP (enterprise resource planning) systems

removed some of that invisibility. Newer and more efficient

ERP systems replaced older and less efficient legacy systems.

There were disruptions and adjustments.

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Nobody likes change, even when it’s for a good reason.

ERP put the CIO on the map. A major transformation was

occurring, and the CIO was at the center of it.

While there is no question that ERP played a key part in

elevating the role of the CIO as a corporate player, ERP was

still a back-office function—which meant that it was invisible

to most people in the organization.

The CIO as Rock Star

It took a unique convergence of several phenomena to

permanently alter and elevate the role of the CIO. The phe-

nomena included the development and successful marketing

of inexpensive and relatively powerful personal computers;

wide access to the Internet and the World Wide Web; and the

rapid adoption of user-friendly Web browsers.

It didn’t take long for visionary entrepreneurs and investors

to connect the dots. Once it became apparent that an organi-

zation could conduct real business over the Internet, the role

of the CIO suddenly became significantly more important.

Information technology was seen as driving the next big

wave of business. The CIO was the person who understood

information technology.

Amid the excitement, the status of the CIO rose. But so

did expectations. People now equated information technol-

ogy with business success. They wanted the CIO to help

them succeed. They wanted the CIO to help them make

more money.

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Let’s pause and think about this for a moment. One day,

you’re the person responsible for keeping the IT systems

running. The next day, you’re one of the people responsible

for making sure the company makes money.

This isn’t a matter of doing a little extra work over the

weekend. This is a monumental shift. There are huge differ-

ences between someone whose job is keeping the IT systems

running and someone whose job is making money for the

company. If you’re the CIO of a large corporation or a

publicly traded company, you are now in the spotlight. And

being in the spotlight can get uncomfortable.

Real Stories from Real IT Leaders

In a very real sense, this book picks up where The Transfor-

mational CIO leaves off. One flows into the other. Even

before I finished writing The Transformational CIO, I knew

that I had to get this book started. They are two strands of a

single thought, an unbroken narrative that examines the

numerous challenges facing the modern CIO in a rapidly

evolving global economy.

I certainly recommend that you read The Transformational

CIO, but it’s not required. You will learn a lot from this book.

Like The Transformational CIO, it’s constructed primarily

from in-depth interviews with people who are probably very

similar to you—executives, directors, and managers at

companies where IT is expected to perform the increasingly

complex dual role of maintaining day-to-day operations and

providing strategic advantages in highly competitive markets.

REAL STORIES FROM REAL IT LEADERS 7

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Learning from Listening

I spend practically all day listening to CIOs. It’s the central and

most important part of my role as president and chief execu-

tive at HMG Strategy, the leading producer of CIO thought

leadership events in North America. The success of my busi-

ness depends largely on my ability to have meaningful, valu-

able conversations with senior IT leaders at companies all

over the world.

Essentially, my workday is a continuing series of conversa-

tions with CIOs. I mostly listen, because it’s the best way

to learn. I’ve filled notebooks with snippets from these

conversations, and several years ago I decided to use some of

them as the foundation for a book. The notebooks gradually

evolved into my first book, The Transformational CIO.

The book’s success led to a second book, which you are

reading now.

What makes these books different from other IT manage-

ment books is that they are not dry products of academic

research and/or thinly disguised promotions for narrow view-

points about specific kinds of software.

The Transformational CIO and On Top of the Cloud are un-

biased and minimally edited words spoken by the leaders and

executives who make critical decisions about the advanced

technologies that enable the modern enterprise.

Like The Transformational CIO, this book is a collection

of stories, anecdotes and insight, knowledge and wisdom

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that I’ve collected from hundreds of conversations. On Top

of the Cloud is pure reality, distilled into a highly readable

format. These are the voices of your peers, sharing their real-

life stories.

More Than Technology

Although there’s a lot about the cloud in this book, this is not

a book about the cloud, per se. This is a book about leader-

ship. It’s filled with stories about leaders who have leveraged

the power of newer technologies to grow revenues and im-

prove profits. In short, they are business executives first and

technology executives second.

Today’s successful CIOs are true executive leaders. They

are educated, experienced, and corporate-savvy—in a meet-

ing, there’s no way to tell them apart from their C-level peers.

Modern CIOs know how to work collaboratively at the high-

est levels of the organization. They have a seat at the table,

they feel comfortable in the executive boardroom, and they

know what’s expected of them.

The Real Challenge Is Organizational

Tod Nielsen is co-president of Applications Platform at

VMware, the global leader in virtualization technology. When

I asked Tod to list the major challenges facing organizations

as they move toward greater use of the cloud, his reply

focused on people and processes—and not on technology.

Here’s a summary of what he told me:

THE REAL CHALLENGE IS ORGANIZATIONAL 9

C01 11/14/2011 13:46:36 Page 10

It’s easy to talk about the technology and the architecture

of cloud services. They are definitely significant pieces of

the conversation. But the real issues that we are seeing have

more to do with change management, education, building

trust, and transforming the organization.

For example, the classic IT org chart is a hub and spoke

model in which database administrators, systems administra-

tors, and network administrators are all separated. But

you can’t have those separate and distinct silos in a cloud or

virtualized computing model.

In the cloud, all of those IT functions are interdependent

and have to work together. So it is a real issue setting up the

right organizational structure. A lot of folks don’t think about

the cloud from an organizational perspective. As a result, they

get to a certain point and they hit a brick wall.

The question you really need to ask is, ‘‘How do we pivot the

IT organization so it can accomplish something that’s never

been done before?’’

We see some IT organizations experimenting with best-

practice teams. They don’t change the formal org structure

of IT, but they create these active entities that, over time,

become permanent fixtures. These best practice teams essen-

tially pilot the transformation. They can help break down

the walls between silos. And they can also attract funding,

because they are often driving changes that can result in

cost savings.

‘‘The question you really need to ask is, ‘How do wepivot the IT organization so it can accomplish some-thing that’s never been done before?’’’

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I asked Tod to describe the typical composition of a best-

practice team. Here’s what he recommends:

First and foremost, you need someone who is a die-hard

believer and an evangelist. You need to anoint a champion.

Every organization has someone like that. You just need to

find that person. Your champion can come from any of the

silos. You’ll have to look around. Just make sure that you pick

someone with the passion to drive a real transformation.

You want your best-practice team to have a strong propor-

tion of cloud believers, but you also want to include some

naysayers. They will give the team credibility, and they are the

ones you will need to win over early on.

Remember, there are two kinds of IT people: classic IT and

what I call the ‘‘raw developer community.’’ The developers

tend to be active, dynamic, and always ready to try something

new. They want to have a dialogue, and they’re often ahead of

the vendors.

Classic IT people, on the other hand, are a more varied

group. Many of them realize that a new wave is coming, and

they want to get on top of it. And some are very resistant to

change.

I was chatting a few months ago with a CIO who told me

that no one in his organization is permitted to use the public

cloud. I asked him how many people in the company have

iPads. He conceded that a ‘‘fair number’’ of people in the com-

pany have iPads. I said, ‘‘I guarantee you that your iPad users

have Dropbox accounts, and therefore you have corporate

documents in the public cloud.’’ He said, ‘‘No way, that can’t

be true.’’ A week later, he called me and said, ‘‘Wow, you were

right. They’re using the public cloud, even though we told

them not to.’’

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‘‘First and foremost, you need someone who is a die-hard believer and an evangelist. You need to anoint achampion. Every organization has someone like that.You just need to find that person. Your champion cancome from any of the silos. You’ll have to look around.Just make sure that you pick someone with thepassion to drive a real transformation.’’

Tod makes an excellent point with this anecdote. Chances

are that your IT organization includes a truly diverse range of

opinions and beliefs about the cloud. Part of your role as CIO

is making sure that everyone—whether they love the cloud or

hate it—is brought up to speed and understands what the

cloud can and cannot do. Only then can you have an

informed debate over the cloud’s merits.

Leadership Is Essential

Meet Randy Krotowski, CIO Global Upstream at Chevron.

It’s hard not to like Randy. He’s one of those naturally open

and optimistic people—he’s a good guy and a brilliant

executive.

Randy leads an organization of about 2,500 people spread

across 23 countries. Whenever you’re managing an organiza-

tion of that size, there will be challenges to resolve. In his

formative years as a chemical engineer, and later on in a vari-

ety of leadership roles at Chevron, he learned that in many

situations, there’s no substitute for hands-on experience and

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face-to-face meetings. So he tends to travel a lot. On one re-

cent trip, he logged 129 travel hours in 14 days.

‘‘I went out and I talked to the people I had to talk to. It’s

part of the job,’’ says Randy. ‘‘You’re only as good as the lead-

ership and the talent you have within your organization. If

you can get 2,500 people moving in the same direction, you

can do some amazing things.’’

Randy speaks with the calm and friendly demeanor of a

true leader. In many ways, he seems like a role model for the

modern transformational CIO.

‘‘You’re only as good as the leadership and the talentyou have within your organization. If you can get 2,500people moving in the same direction, you can do someamazing things.’’

‘‘I got some great advice a long time ago: Be an enterprise

leader first, and a technology leader second,’’ says Randy. ‘‘As

an enterprise leader, my job is helping the company figure

out what it needs and where it needs to go to be successful

in the long term. How do we respond to the changes going

on in the world around us? How do we make sure that we’re

focusing our attention on the things that really matter? Those

are the big questions I’m dealing with.’’

Of course, he is still responsible for making sure that IT

executes its mission. ‘‘The CIO is hired to have a point of

LEADERSHIP IS ESSENTIAL 13

C01 11/14/2011 13:46:37 Page 14

view and a strategy. But if IT doesn’t execute, then your point

of view and your strategy won’t matter.’’

Nevertheless, Randy describes himself as ‘‘more of a strate-

gist than an operational leader.’’ That doesn’t mean that he

isn’t versed in the technology—it just means that he knows

his role is providing leadership, not technical expertise.

There are plenty of people here who know more about IT than I

know, and that’s fine. In a large organization, you can only

focus on a few things at a time. If you focus too closely on the

details, then you might wind up going around in circles, and

your perspective will be limited to the short-term. But if you’re

trying to have an impact on the direction of the enterprise, you

need a point of view that stretches at least five to ten years into

the future.

I truly believe that Randy has defined the critical difference

between the traditional CIO, whose primary role was keeping

the lights on, and the transformational CIO, whose primary

role is helping the senior executive team guide the enterprise.

‘‘You’re brought in as CIO because they want you to succeed.

Everyone is betting on you,’’ he says.

But if you don’t deliver, your credibility can vanish—so a

big part of the CIO’s job is maintaining his or her credibility.

Randy says,

Credibility is the currency you have in the organization. If

you have tons of credibility, you can do big things. If you

don’t, then you’re going to be running servers and data centers,

because that’s all they’ll trust you with. Credibility is built by

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making and keeping commitments. And when you can’t keep

a commitment, you have to be transparent and explain why.

You have to come clean. A lot of people can’t do that—they’d

rather not surface a problem and try instead to fix it by them-

selves. But realistically, if you don’t surface a problem, people

won’t pay attention, and you aren’t going to get the help you

need to fix it.

‘‘Credibility is the currency you have in the organization.If you have tons of credibility, you can do big things.’’

For the transformational CIO, transparency is a fundamen-

tal building block of superior execution and credibility. Both

are necessary to maintain the trust and confidence of senior

management.

LEADERSHIP IS ESSENTIAL 15

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C02 11/14/2011 13:57:50 Page 17

Chapter 2

IT Does Matter

C02 11/14/2011 13:57:50 Page 18

C02 11/14/2011 13:57:50 Page 19

Back in 2003, Nicholas Carr wrote an article for the Harvard

Business Review entitled ‘‘IT Doesn’t Matter.’’ The article is

now legendary—several CIOs referred to it during our

conversations—and it still incites vigorous debate. As most of

you already know, Carr argued that IT would become a

commodity, like electricity, that provides basic capabilities,

but not strategic advantages.

Carr’s article sparked some furious debate. Many people

thought he was right. Some even said that the arrival of cloud

computing was the final nail in IT’s coffin. Once everything

moved to the cloud, they reasoned, there would be little

need for a robust corporate IT function. The CIO would be

relegated to the role of custodian or supervisor—the person

who called the cloud vendor in the unlikely event that some-

thing went wrong.

Caught up in the hype, writers and analysts saw the cloud

as living proof that Carr’s vision of the future was both sensi-

ble and accurate. Of course, it didn’t quite work out that way.

The responsibilities of the CIO, the burdens on IT, and the

expectations that technology must deliver real business value

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have dramatically increased, not diminished, since Carr’s

famous article was published.

So at the risk of stating the obvious, it’s important to filter

out the hype and stay focused on what we know is real: IT

does matter, and the CIO is expected to lead IT in such a way

that it delivers value to the enterprise. Moreover, the CIO is

expected to provide leadership across the entire enterprise.

In other words, now that the CIO has a seat at the C-level

executive table, the CIO is expected to provide C-level execu-

tive leadership.

Stay Focused on Delivering Value

Over the course of writing and researching this book, I have

conducted more than 70 interviews with CIOs and IT industry

leaders. Time and time again, they told me this: The cloud is

not the solution. The cloud is part of a solution, one piece of a

much larger puzzle.

There is no question that for many organizations, software-

as-a-service (SaaS) makes sense today. And I think it’s reason-

able to say that in the near future, the business benefits of

platform-as-a-service (PaaS) and infrastructure-as-a-service

(IaaS) will become increasingly clear. We’re on a path, but

we’re not there yet.

Here’s something we can say with certainty: For the vast

majority of businesses and organizations, the cloud represents

an evolutionary step away from the traditional IT paradigm

and a step toward something new.

20 IT DOES MATTER

C02 11/14/2011 13:57:50 Page 21

Let’s take a moment to discuss the difference between a ‘‘step’’

and a ‘‘leap.’’ A leap is okay if you know where you’re leaping

from and where you’re leaping to. If you’re not sure, don’t leap.

Sometimes the smart strategy is taking several exploratory

steps. At this particular moment in history, it’s important for

CIOs to be conducting pilots and experiments with cloud-

based offerings. That’s really the only way for the CIO to

discover what the cloud can and cannot provide. There’s no

substitute for first-hand knowledge, so now’s the time to put

some skin in the game and find out what the cloud can do.

At the same time, the CIO must remain focused on the

much more difficult task of leveraging technology to create

business growth and value. That’s what the CEO and

the stakeholders want—business growth and value. No matter

what they might say, they really aren’t interested in the tech-

nology itself. On the other hand, they do care very much

about results you can help them achieve.

The cloud is a means to an end, not the end itself. There is

some very cool technology in the cloud. But today’s CIO

is expected to deliver more than cool technology—the CIO is

expected to deliver measurable business value.

So now the real question becomes:

How does the CIO deliver real value?

If that is the primary question, the logical follow-up

question is:

STAY FOCUSED ON DELIVERING VALUE 21

C02 11/14/2011 13:57:50 Page 22

Should the CIO focus on achieving increased operational

efficiency or continuous innovation?

And the next logical follow-up question is:

Can the CIO achieve both?

Replacing the Perpetual Pendulum

Randy Spratt is the EVP, CIO, and CTO of McKesson Corpora-

tion, one of the world’s leading health care services and infor-

mation technology companies. McKesson is currently ranked

14th on the Fortune 500. But even if McKesson were smaller

and less prestigious, it would be worth knowing more about,

since its primary business is helping hospitals, physicians, and

pharmacies deliver high-quality health care by reducing costs,

streamlining processes, and improving the quality and safety

of patient care. What McKesson does has an impact on all of

us and our families.

Randy was a keynote speaker at our CIO Executive Leader-

ship Summit in San Francisco last year, and I very much

wanted to include an interview with him in this book.

When chatting about the challenges confronting CIOs,

Randy uses a great image: a ‘‘perpetual pendulum’’ in which

the CIO’s priorities swing back and forth between the

perceived needs of the business and the perceived needs

of IT. The business seeks speed and agility to generate top-

line growth; IT seeks efficiency and security to improve the

bottom line. Depending on the state of the economy and

22 IT DOES MATTER

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the overall health of the business, executive management will

swing from one extreme to the other—and woe to the CIO

who doesn’t follow the swinging pendulum.

Now imagine replacing the ‘‘perpetual pendulum’’ with a

virtuous cycle in which IT is constantly evolving through

phases of innovation, adoption, standardization, and com-

moditization. Instead of a wasteful battle between proponents

of top-line and bottom-line growth strategies, you have a

smooth and continuous evolution that enables both strategies

to coexist and to support each other constructively.

Let’s look at the virtuous cycle in greater detail. The innova-

tion phase covers the development of new products and new

services. Clearly this is about top-line growth. The adoption

phase is all about customer satisfaction and customer experi-

ence. This phase is also focused on top-line growth. The ac-

companying graphics from Randy illustrate this concept.

IT Life Cycles in Value Creation: Perpetual Pendulum

REPLACING THE PERPETUAL PENDULUM 23

C02 11/14/2011 13:57:51 Page 24

IT Life Cycles—Another Version: Virtuous Cycle

Remember, the cycle is constantly evolving toward greater

maturity, so the next two phases—standardization (process

efficiency, operational excellence) and commoditization

(high availability, demand-driven, business continuity, secu-

rity, low cost)—will be all about bottom-line leverage.

In the virtuous cycle described by Randy, the goals of IT

and the goals of the business aren’t mutually exclusive—they

are complementary and supportive.

Driving the Innovation Agenda

Tom Peck is the CIO of Levi Strauss & Co. A graduate of the

U.S. Naval Academy and the Naval Postgraduate School, Tom

began his career in the U.S. Marine Corps, where he held a

variety of finance and technology jobs.

When I asked him to describe the major challenges facing

modern CIOs, the item at the top of his list was ‘‘driving an

24 IT DOES MATTER

C02 11/14/2011 13:57:53 Page 25

innovation agenda.’’ Here’s how he describes that agenda, in

his own words:

Levi Strauss & Co. is a 150-plus-year-old company that has

been innovating since 1873, the year we created the world’s

first blue jeans. Throughout our long history we’ve inspired

change in the marketplace, the workplace, and the world. But

bringing innovation through technology and ultimately to the

way we sell and how we interact with consumers is new to us.

We’ve all discussed and read about the importance of CIOs

and IT leaders being influential and ‘‘having a seat at the

table.’’ Nowhere is this more true than in driving the innovation

agenda. It’s easy to chase too many or too few ideas. It’s some-

times difficult to find seed money for innovation. And often-

times the business doesn’t know what they want or what IT

may be capable of delivering. One of my favorite quotes is

from Henry Ford: ‘‘If I had asked people what they wanted,

they would have said faster horses.’’

. . . we must stay at a reasonable pace with the overall

trends in the consumer marketplace and ‘‘@ home’’ technolo-

gies. I truly believe that individual people (end users and our

employees), not IT organizations, will fuel the next wave of

technology innovation and adoption. Thus it’s important we

stay relevant, innovative, creative, and closely aligned with

the workforce we are trying to enable.

‘‘I truly believe that individual people (end users and ouremployees), not IT organizations, will fuel the next waveof technology innovation and adoption. Thus it’s impor-tant we stay relevant, innovative, creative, and closelyaligned with the workforce we are trying to enable.’’

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C02 11/14/2011 13:57:53 Page 26

Driving innovation means keeping close tabs on the trends

and patterns of global markets. One of the most powerful—

and perhaps least anticipated—trends is the consumerization

of information technology. Here are Tom’s thoughts on

the topic:

The reality is that many of us have powerful computer sys-

tems at home, and social computing tools like Facebook,

Twitter, blogs, etc., are a part of our everyday lives. As

technology plays an increasingly important role in our

personal lives and we become accustomed to the power,

convenience, flexibility, and connectedness of consumer

technology experiences, we want those same capabilities to

help us at work.

However, in most cases we aren’t being given the tools. It

wasn’t that long ago that we learned about and experienced

cutting-edge technology in the workplace. How quickly that

has changed—as consumers, we now have access to and take

advantage of the latest technology to hit the shelves or even be

streamed as a service through our high-speed broadband

connections.

The reality is that corporate IT, for the most part, lags in

adoption and deployment cycles. . . . We often align to bring

business the ‘‘latest’’ offerings for the enterprise . . . only

months or even years late. It’s further complicated by the new

influence of the millennial generation.

CIOs cannot always say ‘‘no.’’ We need to adopt and

embrace consumer technologies, learn from our users (who

are also consumers), and put the appropriate guard-rails in

place to allow for agility without sacrificing security, total cost

of ownership, and support levels.

26 IT DOES MATTER

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‘‘CIOs cannot always say ‘no.’ We need to adopt andembrace consumer technologies, learn from our users(who are also consumers), and put the appropriate guard-rails in place to allow for agility without sacrificingsecurity, total cost of ownership, and support levels.’’

Driving continuous innovation requires a different ap-

proach to managing IT. Tom’s thoughts on managing the new

IT ‘‘ecosystem’’ are especially relevant:

The days of doing business with one company for hardware,

another for software, etc., are gone. Today, the modern CIO is

almost more like a supply chain officer—a supply chain of

technology offerings—managing an ecosystem of partners,

suppliers, devices, in or out of the cloud, and more. No longer

do you do a deal with one partner in the room.

Today’s ecosystem is becoming more and more complex.

Even the most experienced CIOs can get confused. We are see-

ing the perfect storm. Tech spending is favorable. There is a

favorable cycle for product renewals.

Consumers continue to become more ‘‘tech friendly.’’

We are watching device convergence and lower-priced, more

capable computing chips. Mobility and cloud offerings further

complicate the ecosystem as your friendly supplier now offers

to do ‘‘everything’’ for you.

This is leading to what I call ‘‘vertical integration’’—where

companies lack a solution, they’re acquiring or forming

strategic partnerships. It started years ago when hardware and

software companies started acquiring services businesses. Now

you’re seeing integration between hardware and software,

on-premise and cloud, mobile and not, and much more.

DRIVING THE INNOVATION AGENDA 27

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It begs the questions of what will happen to niche players

who lack the ‘‘verticalness.’’ A handful of cash-rich companies

are consolidating power . . . expanding into new business or

product lines . . . possibly making it harder for small or mid-

size competitors to break through. The largest tech companies

(like Apple, Oracle, Google, Microsoft, and others) generated

nearly $70 billion in new cash between 2007–2009 compared

to nearly $14 billion for the other 65 tech companies in the

S&P 500 index. From the end of 2007 to end of 2009, the 10

richest tech companies increased their cash levels by 48 per-

cent to $210 billion.

The gap is at an all-time record high. This imbalance is

changing how businesses behave. CIOs must figure out not

only whom to negotiate and source with, but how to leverage

the capabilities across multiple service providers in the global

marketplace.

We will hear more from Tom in Part II of this book when

we look more closely at leveraging the cloud to drive value

for the enterprise.

‘‘CIOs must figure out not only whom to negotiate andsource with, but how to leverage the capabilitiesacross multiple service providers in the globalmarketplace.’’

It’s All a Question of Perspective

Mark Hillman is VP, Strategy and Product Line Management

at Compuware Corporation. Compuware provides software,

experts, and best practices to ensure that technology works

28 IT DOES MATTER

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well and delivers value. The company serves 7,100 cus-

tomer organizations worldwide, including 46 of the top

50 Fortune 500 companies and 12 of the top 20 most visited

U.S. Web sites.

Basically, you hire Compuware to make certain that your

technology is performing optimally. And if your technology

isn’t delivering the appropriate level of value, Compuware

will help you figure out how to improve its performance.

Our conversation ranged far and wide, but one of Mark’s

observations about cloud computing really struck home. We

were talking about all the usual concerns around the cloud.

Security, of course, topped the list. But here’s what Mark said

that pushed the conversation into high gear:

‘‘Security is critical, but you should look at it as an item on

your due-diligence checklist, not as a barrier.’’

In other words, you manage security in the same way that

you manage all the other challenges that you encounter in

your role as an IT leader.

‘‘Security is critical, but you should look at it as anitem on your due-diligence checklist, not as a barrier.’’

Mark’s comment about the due-diligence checklist got me

thinking about how different kinds of CIOs sometimes look

at the world from very different perspectives.

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For example, traditional CIOs generally see themselves as

risk-averse, while transformational CIOs are more likely to

see themselves as risk-aware. Another quick example: Where

the traditional CIO might focus on service levels, the transfor-

mational CIO is more likely to focus on business continuity.

I put together a little table showing some of the differences

between ‘‘traditional’’ and ‘‘transformational’’ approaches to

IT leadership. I hope it engages your interest and sparks

some debate.

‘‘Traditional’’ worries mostly

about . . .

‘‘Transformational’’ also focuses

on . . .

Security Speed to market

Cost reduction Business continuity

Service levels Customer satisfaction

Minimizing risk Managing risk

Process Results

In real life, the two perspectives aren’t separated by a brick

wall. They represent subsets of your larger responsibility as

an IT leader to drive change and innovation across the

enterprise.

30 IT DOES MATTER

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Chapter 3

The Engine of Innovation

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We talk a lot these days about the need for continuous

innovation. But who is more responsible for innovation,

IT or the business?

‘‘It’s a balancing act,’’ says Rich Adduci, senior vice president

and chief information officer at Boston Scientific. ‘‘We certainly

want guidance from the business. Under our governance

model, it’s up to the business to sort out where we make our

investments. At the same time, we can’t allow every project

requested to go forward. If we’re going to continue being

efficient and effective, we need to get the most value from the

solutions we deliver. Sometimes we have already invested in

a solution, and we need to leverage that investment.’’

Rich makes a great point. As IT leaders, we need to be inno-

vative. But we also need to know how to say no—tactfully,

gracefully, and respectfully—when the business requests a so-

lution that duplicates an existing capability, appeals to a limited

number of users, or creates more problems than it solves.

‘‘There has to be a business case for making the invest-

ment, or you’re doing the shareholders a disservice,’’ says

Rich. ‘‘That’s why you need good governance and strong

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C03 11/14/2011 14:6:18 Page 34

leadership, so you can concentrate on adding value to the

company. You cannot afford to waste money.’’

The consumerization of technology has been great for

consumers, but it can make headaches for the CIO, especially

when the business asks for devices or solutions that cannot be

integrated smoothly into existing infrastructures.

‘‘There will always be that bright shiny object that attracts

attention, a niche solution that people like better than what

they have today,’’ says Rich. ‘‘But if everyone acts indepen-

dently, then nothing connects—and you have a big mess.

The hard part of IT is getting everything to work together so

information flows seamlessly across a tapestry of different

platforms and solutions. That isn’t easy, but it’s an important

part of the job.’’

‘‘The hard part of IT is getting everything to worktogether so information flows seamlessly across atapestry of different platforms and solutions.’’

Rich recently launched an innovation incubator within IT

to provide seed money for internally developed projects

that show promise. ‘‘We can take an idea to the proof-of-

concept stage, offer a live demo, and show people the op-

portunity,’’ says Rich. It’s a ‘‘fail fast’’ approach to innovation

that keeps the creative juices flowing without wasting

precious resources.

34 THE ENGINE OF INNOVATION

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In some instances, it makes sense for IT to take the lead in

mainstreaming new technology. For example, the IT group at

Boston Scientific recently rolled out an initiative to equip the

sales force with tablets. Rich says that when he introduced

the idea to the members of his leadership team, some raised

concerns about security, connectivity, integration, and other

potential problems.

‘‘There were a thousand reasons not to do it. But part of

our mission in IT is bringing innovation to the business.

I remember pointing to the tablet and saying, ‘This is clearly

the right answer, so let’s go do it.’ And we did, and it was

a home run.’’

Were there some risks involved? Yes, but Rich and his team

identified the risks and figured out how to manage them.

‘‘You cannot be innovative without taking some risks. If you

think you can mitigate all the risks and still be innovative,

you’re wrong. You have to be willing to jump a little, to make

a leap. If you’re not willing to do that, you cannot aspire to be

innovative.’’

I think that’s a wonderful way of framing the challenge of

bringing true innovation to the enterprise. You need strong

governance, strong leadership, and strong relationships. And

you need a certain amount of courage—because you can’t

predict the future with total certainty. There will always be

risks. Transformational CIOs understand the risks, weigh

them judiciously, and then make decisions that will add value

to the enterprise.

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Bringing Innovation to the Surface

Rich’s story started me thinking about the role of the CIO as a

champion of innovation. Obviously, the CIO can’t be held

personally responsible for innovation. But the CIO can cer-

tainly help create an environment and a culture that encour-

ages and supports innovation across the enterprise, no matter

where it arises.

Innovation comes in many forms and dimensions. You can

find innovation in every part of the enterprise: procurement,

HR, finance, IT, operations, organizational development,

product development, manufacturing, sales, marketing, distri-

bution, fulfillment, customer service. Human beings are born

to innovate. It’s part of our DNA.

Because innovation can lead to competitive advantages in

business, it is considered the key to growth and success.

That’s why we spend lots of time thinking, talking, and writ-

ing about it.

Despite the overwhelming importance of innovation, we

often find it difficult to create work environments that are

truly receptive to innovation. Sometimes, in our haste to

streamline business processes and reduce inefficiency, we act

as though innovation were an enemy instead of our friend.

The resistance to innovation is understandable, because inno-

vation brings change, and nobody likes change.

So when I heard this story from Allan Hackney, SVP and

CIO at John Hancock, I knew I had to share it with you. The

36 THE ENGINE OF INNOVATION

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story begins in June 2010. Like many companies, John

Hancock was recovering from the impact of the global reces-

sion. Many of the company’s employees were worried about

the future. Management was looking for ways to boost morale

and reignite the spirit of creativity that had led the company

to success in the past. Here’s the rest of the story in Allan’s

own words:

We decided to hold a contest. The challenge was to develop a

practical way for managing mobile tablets, which had been

recently introduced in the marketplace. You had 90 days to

develop a prototype, using a mobile tablet provided by the

company. You would have to demonstrate your prototype to

the rest of the company at a special event. Your prototype

would be judged by a panel, and if you won, you would keep

the tablet. It was that simple.

We called the contest Project Launchpad. It was open to all

employees in the U.S. and Canada—about 7,000 people. We

estimated that maybe 25 to 40 ideas would be submitted. We

received 176 ideas—more than four times the maximum

amount we had anticipated. We had ideas submitted from

every level and every part of the organization, everyone from

nonexempt hourly workers to executive vice presidents. It was

truly amazing. People were coming out of the woodwork with

great ideas.

We had formed a cross-functional team of five employees to

manage the contest. They went through every idea submitted

and winnowed the field down to 26 employees working on

14 projects (similar ideas were folded into one project to avoid

duplication).

At the end of the 90 days, the contestants demonstrated

their projects at our two main sites in Boston. The team

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C03 11/14/2011 14:6:18 Page 38

leading the contest had picked four senior executives to judge

the demos. Some of the judges were selected because they were

skeptical about mobile computing, and we wanted them to

experience working with mobile tablets. We even built a little

tablet app for scoring the projects.

The judges loved it. They awarded prizes for first, second,

and third place. Best of all, we adopted all three of the win-

ning projects and put them into production. One of the

employees who entered the contest—someone from our retire-

ment planning business—was reassigned to work full-time on

developing his idea. And he’s not an IT guy!

The real lesson we learned is that there is a huge amount of

talent and creativity within our organization. We also

learned that no single department has a lock on innovation.

The contest enabled us to tap into the knowledge and creativ-

ity of our employee base. Our people have great ideas, and we

gave them the opportunity and the resources to show what they

can do.

‘‘The real lesson we learned is that there is a hugeamount of talent and creativity within our organization.We also learned that no single department has a lockon innovation. The contest enabled us to tap into theknowledge and creativity of our employee base. Ourpeople have great ideas, and we gave them the oppor-tunity and the resources to show what they can do.’’

Project Launchpad was so successful that it inspired a simi-

lar approach for solving challenges in modeling actuarial

data, an area of critical focus in the insurance business. The

38 THE ENGINE OF INNOVATION

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company assembled a cross-functional team to look beyond

the traditional solutions and develop innovative ways for

handling increasingly complex data.

‘‘After Project Launchpad demonstrated that our employees

could help us solve problems like managing mobile comput-

ing, we realized we could use a similar approach to solve dif-

ferent kinds of problems, such as data modeling,’’ Allan says.

‘‘The point of the story is that you don’t always have to spend

an arm and a leg on innovation. You can find great ideas by

reaching into your organization and letting people work on

projects that excite them.’’

Incentivizing Innovation

Let’s stay on the topic of innovation a bit longer. In this sec-

tion, I’d like to drill down and explore the process of encour-

aging and rewarding innovative behaviors and instilling a

culture of innovation.

Becky Blalock is the former senior vice president and chief

information officer at Atlanta-based Southern Company. With

4.4 million customers and more than 42,000 megawatts of

generating capacity, Southern Company is the premier energy

provider in the Southeast. A leading U.S. producer of electric-

ity, Southern Company owns electric utilities in four states

and a growing competitive generation company, as well as

fiber optics and wireless communications. Its brands are

known for excellent customer service, high reliability, and

retail electric prices that are below the national average. The

company is consistently listed among the top U.S. electric

INCENTIVIZING INNOVATION 39

C03 11/14/2011 14:6:18 Page 40

service providers in customer satisfaction by the American

Customer Satisfaction Index and topped Fortune’s ‘‘Most

Admired’’ list in the electric and gas utility sector for 2011.

I cite these statistics and achievements to give you an idea

of what makes Southern Company different from other com-

panies in the energy sector. Southern Company doesn’t see

itself as just another utility. It sees itself as a company provid-

ing essential services to customers spread across four states.

When tornados struck in Alabama, for example, Southern

Company used Twitter to send updates to customers in af-

fected areas. That might not seem like a big deal, but if you

are a customer with no power, seeing a tweet on your smart

phone that lets you know the repair trucks are on the way can

bring a lot of comfort.

Becky fit in well with the customer-focused culture at

Southern Company. In her role as CIO, she directed IT strategy

and operations across the 120,000 square miles and nine

subsidiaries of Southern Company. She led more than

1,100 employees, and her responsibilities encompassed infra-

structure, networks, desktops, applications, telephony, and

cyber security.

Technically, she’s not really a techie. Becky has an under-

graduate degree in business administration from State Univer-

sity of West Georgia. She holds a master’s degree with honors

in business administration from Mercer University, and

she successfully completed the Program for Management

Development at Harvard University in 1994. A graduate of

Leadership Atlanta and Leadership Georgia, she was named

40 THE ENGINE OF INNOVATION

C03 11/14/2011 14:6:18 Page 41

a Fellow of the International Women’s Forum Leadership

Foundation.

Over the span of her career, Becky has served in a variety

of leadership positions in corporate communication, external

affairs, the office of the CEO, accounting, finance, and cus-

tomer service. Prior to joining Southern Company, she was

vice president of Georgia Power’s community and economic

development department, responsible for marketing and

positioning the state of Georgia in a global economy. Under

her leadership the department was internationally recognized

as one of the top economic development organizations in the

world, and she was named one of the ‘‘Top 10 Outstanding

Young Leaders in Economic Development in America.’’

Becky has received a host of honors, including being

named one of Computerworld magazine’s 2006 Premier

100 IT Leaders and 2003 Georgia CIO of the Year, Global

Category, by the Georgia CIO Leadership Association.

I mention Becky’s accomplishments and awards because

they are relevant. In today’s complex and customer-centric

markets, being technically proficient is not enough. You need

to understand the needs of the business, and you need to un-

derstand the needs of the markets that the business serves.

Visualizing the customer and understanding the customer’s

needs is now part of the CIO’s core responsibility. In the past,

it might have been okay for the CIO to focus primarily on

technology. Today, the CIO’s vision must include the com-

pany’s customers.

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C03 11/14/2011 14:6:18 Page 42

Southern Company, for example, is one of the nation’s

most automated energy providers. It uses automation to

improve efficiency (internally) and to improve service to

its customers (externally). The company is now applying

its expertise in automation to the product itself—electric

power. Southern Company is leveraging its automation

capabilities to develop a Smart Grid that senses trouble

and enables the company to take action to prevent poten-

tial outages and reduce the impact of outages when they

do occur. From an internal perspective, it means rolling

fewer trucks and deploying fewer repair teams. From an

external perspective, it means higher levels of customer

satisfaction.

The ability to balance a company’s internal needs with the

needs of its customers is becoming increasingly critical to the

CIO’s overall success. But achieving this balance is not a solo

act. It requires company-wide effort and cooperation.

It also requires a culture of continuous innovation, be-

cause the needs of the market are continuously changing.

Becky and her team at Southern Company were acutely

aware of this, and they developed a unique process for

encouraging and incentivizing innovation.

‘‘Companies don’t innovate—people do. If you want tobe innovative as a company, you have to reward peoplefor being innovative.’’

42 THE ENGINE OF INNOVATION

C03 11/14/2011 14:6:19 Page 43

I interviewed Becky while she was CIO, and she explained

to me how the process works:

Companies don’t innovate—people do. If you want to be inno-

vative as a company, you have to reward people for being in-

novative. Seven years ago we created our intellectual property

program. Anybody who turns in an idea gets a coin that

says, ‘‘Innovative Thinker.’’ Some people have 20 coins in

their office.

Since inception, our employees have generated 500 ideas.

About 10 percent of those ideas have cleared the hurdle for a

conventional patent filing. Upon filing for a conventional pat-

ent, each employee inventor is awarded $500. If the patent is

granted, each employee inventor gets $2,000. If we commer-

cialize a patented idea, the inventors can receive up to

1 percent of the revenue. So far, the program has resulted in

eight patents and brought in more than $12 million. It’s also

a great source of pride for all of us.

We recently licensed the rights to a product we developed

through the program. The product is called EM-PACTTM and it

enables us to onboard contractors much more quickly than in

the past. Another product developed through the program ena-

bles us to locate and recover missing meters. We’re moving for-

ward to obtain a patent on that, too.

IT presents an Innovator of the Year Award, and we make a

big deal out of it. We produce a video about the winner and

they receive $1,000. When people know they will be rewarded

for innovating, they get excited and they start thinking about

innovation. They focus on it. Even the coins help. They cost us

three dollars apiece, but they mean a lot to people.

For the last five years, we have been ranked on Computer-

world’s list of ‘‘Best Places to Work in IT.’’ This year we

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C03 11/14/2011 14:6:19 Page 44

received our best ranking to date: number 18! Part of the

reason for our ranking is due to the intellectual property

program. We are seen as an innovative company. To celebrate

this success, we create postcards for our employees. On one

side it says, ‘‘Southern Company—One of the 100 Best Places

to Work.’’ On the other side, I write a note thanking the person

for what they’ve done to help us make this a great place.

All of these steps create a positive culture. When you walk

around our offices, you can see the postcards tacked up all

over. People like them. The coins and the postcards are very

effective symbols. They remind us of our commitment to inno-

vation and excellence.

‘‘When people know they will be rewarded for inno-vating, they get excited and they start thinking aboutinnovation. They focus on it.’’

I think Becky’s story is a powerful reminder of the impor-

tance of providing tangible rewards for innovation. Everyone

wants to be recognized for making a contribution—it’s simply

human nature. Investing time and effort to devise a formal

program for incentivizing innovation will surely pay

dividends.

44 THE ENGINE OF INNOVATION

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Chapter 4

Finding the Right Balance

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C04 11/14/2011 14:10:29 Page 47

In my numerous conversations with CIOs and other senior

executives, several themes emerged. One of the most com-

mon themes was the importance of establishing an appropri-

ate right balance between efficiency and innovation. As

Randy Spratt suggested earlier, it’s difficult to find the right

balance when conditions around you are continually

changing.

I agree with Randy, and with his idea of replacing the ‘‘per-

petual pendulum’’ with a ‘‘virtuous cycle.’’ But the essential

challenge remains: How do you set your priorities when the

ground under your feet is shifting? Today’s markets move

with breathtaking velocity. Maybe instead of striving to find

the right balance, we should settle for a state of dynamic

equilibrium.

But dynamic equilibrium wouldn’t satisfy our need for ever

increasing productivity and efficiency. That’s why I like

Randy’s ‘‘virtuous cycle’’ approach to transformation. It leaves

the door open for all kinds of changes.

The truth is that change comes in many shapes and sizes.

Some changes are anticipated, some are unanticipated. One

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C04 11/14/2011 14:10:29 Page 48

CIO told me that he prefers intentional change over un-

intentional change, but that’s a little bit like saying that you

don’t like surprises.

Like it or not, the life of a CIO is spent managing change.

Two decades ago, most equipment lasted five years. Until

fairly recently, the average CIO could count on a three-year

refresh cycle. Today, the refresh cycle is much quicker.

The operating systems of some devices (such as mobile

tablets) are updated twice annually, which means the CIO

has six months to sit on his or her laurels before all hell

breaks loose.

If the trend continues—and there’s no sign that it will stop

anytime soon—IT will be asked to support devices that are

updated every 90 days.

This is not a trivial issue. Everyone, from the chairman of

the board to the millennial you hired fresh out of college,

expects full network connectivity from his or her favorite de-

vices. If you can’t provide the connectivity they demand, you

will hear from them.

Today, and for the foreseeable future, it’s BYOD—bring

your own device. Yes, there will be a seemingly endless series

of integration issues, but woe to the CIO who can’t manage

them all smoothly.

If it’s any comfort, this challenge of managing change and

productivity has been around for a while. Economists even

have a name for it: the productivity frontier. The productivity

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C04 11/14/2011 14:10:29 Page 49

frontier is where you create maximum value for the company

by leveraging the best available technologies and manage-

ment techniques.

Back in the good old days, the productivity frontier inched

forward. You worried about it every five years. Then as the

pace of technology development accelerated, you worried

about it every three years. Now you have to worry about it

every year, unless your sales force is using some kind of ultra-

chic mobile tablets, in which case you might have to worry

about it every quarter.

Winds of Change

Stephen Gold is a smart, savvy executive. He’s senior vice

president and chief information officer at Avaya, a global

leader in business communications systems. Before joining

Avaya, he held similar senior-level posts at Merck and Medco.

It’s fair to say that when it comes to IT strategy and leadership,

Stephen is a great source of information and insight.

Recently I asked Stephen for his opinion on the changing

role and responsibility of the CIO. ‘‘I think that some subtle,

but important shifts have occurred in the past two years,’’

Stephen told me. ‘‘Three or four years ago, the CIO’s mandate

was biased toward efficiency, cost savings, optimization, and

streamlining business operations, both inside the IT organiza-

tion and across the enterprise. Today, the winds have shifted.

CIOs are still expected to drive efficiency through innovation,

but they’re also expected to drive revenue and value for the

business.’’

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C04 11/14/2011 14:10:29 Page 50

‘‘Today, the winds have shifted. CIOs are still expectedto drive efficiency through innovation, but they’re alsoexpected to drive revenue and value for the business.’’

The idea of the CIO as a ‘‘value enabler’’ is not entirely

new. But Stephen has hit the bull’s-eye by pointing out that in

today’s modern global enterprise, the CIO is now expected to

help the business generate value and grow revenue. In other

words, being perceived as a ‘‘value enabler’’ is no longer

merely a compliment—it’s rapidly becoming a basic part of

the CIO’s mandate.

It also means that to an increasing degree, IT is becoming

responsible for creating and enabling real business value.

When you think about it, all of this represents an amazing

evolution for the IT department. A mere five years ago, IT

was still regarded as the people you call when your printer

stops working. Now, IT is perceived as an integral part of the

corporate revenue engine. This is true progress, for IT and the

enterprise.

Of course, the elevated role of the CIO and the IT function

means greater responsibilities and a heavier workload. That

translates into more projects, faster turnaround times, tighter

deadlines, and higher expectations. It also requires getting

accustomed to a different set of metrics. Until fairly recently,

the CIO was mostly concerned with driving efficiency, and

the metrics reflected that bias. Today, as the CIO becomes

more involved in the value creation process, the metrics are

more likely to focus on revenue, market share, growth, cost

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C04 11/14/2011 14:10:29 Page 51

of sales, and other measures commonly associated with ‘‘the

business.’’

And this raises another interesting question: When are we

going to stop referring to IT and ‘‘the business’’ as separate

entities? I think it’s time to agree that IT is a critical part of

‘‘the business,’’ and that, together, we’re all parts of the larger

enterprise. The mission of IT and the mission of ‘‘the business’’

is the same: to ensure the growth and viability of the enterprise.

The transformational CIO understands and embraces this

common mission and shared purpose. Like the captain of a

ship, the transformational CIO senses the winds of change

and responds appropriately to maintain a steady course.

The Third Bucket

All of the CIOs interviewed for this book agreed that opera-

tional excellence and innovation are two prime areas in

which success is imperative.

But there is a third area in which some CIOs will be

expected to excel: customer management. This third area—or

third bucket, if you will—is becoming increasingly important

as products and services become increasingly dependent on

technology. If what you’re selling is technology, it makes

perfect sense for the CIO to be involved in the customer

management process.

To be fair, I think we’re mostly talking about business-to-

business (B2B) scenarios here, in which the CIO is brought

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into a meeting with a customer or prospective customer for

the purpose of helping the sales executives accelerate the

sales process or close a deal.

But the CIO can also help sales and marketing teams

explain the value of sophisticated technologies. After all, a

prospective customer is likely to view the CIO as a credible

expert in technology—especially when the CIO’s company is

actually using the products or services being sold.

The idea of the customer-facing CIO makes more sense in

some situations than in others. If the product you offer is primarily

intended for consumers—take the Apple iPhone, for example—

then you don’t need to include the CIO in the sales process.

But when the product or service is highly complex and

technology-dependent—let’s say it’s a pharmacy benefits

management service or a data security management service—

then it makes good business sense to bring the CIO into the

sales process.

Not every CIO will feel comfortable taking on a sales role.

But some CIOs tell me that they enjoy their customer-facing

responsibilities because interacting with customers gives

them a much better understanding of the world that exists

outside of the IT organization.

That improved level of understanding helps him do a bet-

ter job of serving the company’s customers, which in turn,

helps the company. All told, it’s a great example of a virtuous

circle in which the CIO plays a critical role.

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The Closer

I had a wonderful conversation with Kim Hammonds, vice

president of IT Infrastructure at The Boeing Company. Kim

told me a great story supporting the idea of customer-focused

technology executives.

First, some background: As most of you know, Boeing is the

world’s largest aerospace company and leading manufacturer

of commercial jetliners and defense, space, and security sys-

tems. As a top U.S. exporter, Boeing supports airlines and U.S.

and allied government customers in more than 90 countries.

The company is organized into two business units: Boeing

Commercial Airplanes and Boeing Defense, Space & Security.

In 2010, Boeing’s UK subsidiary, Boeing Defence UK, was

competing for an important contract for the Log NEC program

with the UK Ministry of Defence’s Joint Support Chain, and

reached back to the United States, asking IT to join the com-

petition team. Here’s the story, just the way Kim told me:

The ministry was looking to upgrade and transform its logis-

tics systems, and it needed to upgrade the IT infrastructure

supporting its logistics processes. We became part of the sales

effort to win that contract for Boeing.

We took the customer through our data centers and showed

them how we migrate applications to those centers. We showed

them how our logistics applications work and how we use our

technology every day to support Boeing. We went through our

processes in detail, so they could see for themselves how we use

the systems and why we have such confidence in our technol-

ogy. It was a fantastic experience, for us and for the customer.

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We ended up winning the contract, and it was a very big

win for all of us. One of the company’s strategic objectives is

increasing sales in the international market, and so it cer-

tainly helped our overall strategy.

And we were proud that IT played a role in securing busi-

ness growth from an important market. I think it shows the

direction the world is moving, and it highlights the role of the

CIO as an executive who leads the IT organization and sup-

ports the company’s growth engines.

We have tremendous technical capabilities within the

four walls of this company . . . it makes sense for IT to part-

ner with the business units, and support the company’s

efforts to win new business and compete more effectively in

world markets.

Kim also told me the key to working with the business is

developing ‘‘a deeply rooted understanding of the business

and the challenges facing the business . . . you need that

deep understanding so you can figure out the best way of ap-

plying technology to generate business value and competitive

advantages.’’

‘‘ . . . it makes sense for IT to partner with the busi-ness units, and support the company’s efforts to winnew business and compete more effectively in worldmarkets.’’

I think that her words really capture the transformational

CIO’s pivotal role as a driver of business growth and value in

the modern corporation.

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Outside versus Inside

Early in the process of writing this book, I interviewed Tony

Scott, the CIO of Microsoft. Tony has had an illustrious career,

holding executive posts at General Motors and Disney. You

will hear more from Tony in later chapters of the book, but

I wanted to share an observation that he mentioned during

our conversation.

Here’s the gist of what he said: In the past, when Microsoft

delivered its software in physical form, the quality of the

media (e.g., how many disks are defective?) and the qual-

ity of the packaging (e.g., container, printed materials)

would be concerns, as well as any possible defects and

bugs in the software itself. In other words, when Microsoft

distributed its software, it also paid attention to the quality

of the aluminized polycarbonate plastic CD-ROMs on

which the software was inscribed, the packaging it was

shipped in, and the printed documentation that accompa-

nied each shipment.

The quality of the CD-ROMs, the packaging, and the

documentation had to be a major focus, since there was really

no other way to distribute software before broadband con-

nections to the Internet became widely available.

But when the tipping point was reached and most of

Microsoft’s customers had high-speed Internet connections,

the company could focus more of its energy on what really

mattered, which was the quality of the user experience. This

was truly a paradigm shift.

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As the corporation shifted gears, the CIO’s role also changed.

Essentially, Microsoft transformed itself from a manufacturer of

software into a marketer of software. That’s a huge difference.

In previous times, the CIO’s attention was focused almost

exclusively on internal challenges. Today, the CIO’s attention

is divided between internal and external challenges.

‘‘You have to pay attention to the company’s customer

base,’’ says Tony. ‘‘You have to be aware of how the market

perceives the company’s products. If you’re not conscious of

external perceptions, you can do the wrong thing when you

design and architect your IT infrastructure. Even if you get the

internal processes right, you can do the wrong thing in terms

of the market if you’re not paying attention to what the

market wants.’’

The modern CIO has to be ‘‘an inside person and an

outside person,’’ says Tony. ‘‘You have to be perceptive about

external and internal influences. And then you have to find a

balance between the two.’’

‘‘You have to be aware of how the market perceivesthe company’s products. If you’re not conscious ofexternal perceptions, you can do the wrong thingwhen you design and architect your IT infrastructure.Even if you get the internal processes right, you can dothe wrong thing in terms of the market if you’re notpaying attention to what the market wants.’’

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Articulating the Value of Technology

The rapid evolution of markets and the consumerization of

technology have combined to create a ‘‘new normal’’ at the

modern enterprise. Today, everyone expects their devices to

be connected, compatible, and secure. They expect the tech-

nology they use at work to have the same user-friendly fea-

tures as the technology they use at home or in the car.

They see technology as part of the company’s competitive

arsenal, and they cannot imagine trying to compete without it.

From their perspective, new technology is like ‘‘table stakes’’

in poker—you need it to stay in the game.

In a world in which technology has become increasingly

commoditized, the role of the CIO shifts from technology pro-

vider to value enabler. For many CIOs, this represents a diffi-

cult transition. Making the leap from technology guru to

business partner isn’t easy. In addition to understanding the

business, you also need to make sure that the business under-

stands you. In other words, you need to communicate in

terms that business people understand.

My good friend Ram�on Baez, the VP and CIO at Kimberly-

Clark, has become an expert in communicating with the busi-

ness. And he believes firmly that most IT leaders need to

sharpen their communication skills.

‘‘Everyone in IT should be able to articulate the value

of what we do in clear business language,’’ says Ram�on.

‘‘It’s incumbent on the CIO and the CIO’s deputies to

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develop the skills they need to communicate with the

business.’’

‘‘Everyone in IT should be able to articulate the valueof what we do in clear business language.’’

Explaining the benefits—and drawbacks—of new technol-

ogy can be problematic, especially in situations where the

new technology is replacing an older and more familiar

technology.

For example, the company recently considered using a

cloud-based human resources solution. Ram�on and his team

knew that it was important for the company’s business leaders

to see the value of moving from a traditional HR system to a

cloud-based service. But they weren’t convinced that the ven-

dor’s sales team could explain the pros and cons of the cloud

to the business leaders.

Essentially, Ram�on used his own communication skills to

teach the vendors how to communicate to the C-suite. Here’s

the story in his own words:

We did a dry run with me, the head of HR, and the vendor’s

team. They did their normal presentation and we realized

very quickly that it wouldn’t fly with our C-suite. So we told

them what our top executives needed to see. We told them,

‘‘If you’re the CEO or the head of a region, here’s the kind of

information you’re looking for, here’s how you can use the

new system to manage overtime costs, here’s how you can

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search through the new system to find employees with special

skills, here’s how you can figure out the optimal ways for uti-

lizing contingent labor.’’

You see, the vendor’s team knew their system inside and

out, but they didn’t know what was important to us. We

needed to communicate to the vendor what was important to

our company. We had to show them how to present to our

company. That’s the magic, the secret sauce—knowing what’s

important.

And that’s why it’s critical for the CIO to really under-

stand what’s important to the company from a business

perspective—so you can explain it to all the people who are

going to help you become a truly transformational leader.

You can’t do it alone, so you need to make sure that every-

one understands what the business needs.

It’s not about the technology. It’s about the problem we’re

trying to solve. It’s about the value we generate. It’s about mak-

ing a better company.

‘‘It’s not about the technology. It’s about the problemwe’re trying to solve. It’s about the value wegenerate. It’s about making a better company.’’

Part of the ongoing challenge is redefining the traditional

IT perspective on innovation. When the role of IT was con-

fined largely to back-office operations, everything—including

innovation—was looked at through the lens of operational

efficiency. So when you talked to someone from IT about

innovation, you were usually talking about improving some

aspect of the company’s back office.

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In today’s customer-centric economy, IT is expected to

drive innovation for the front office as well as the back office.

‘‘We are no longer just innovating for IT,’’ says Ram�on. ‘‘We’re

innovating for sales, for marketing—and for our customers.

That’s the biggest change from the past. We’re not just

focused on productivity and the bottom line. We’re also very

focused on the top line.’’

That doesn’t mean that IT has forgotten about productivity.

It’s just that IT views productivity more broadly than it did in

the past. ‘‘We want to help our sales teams be more produc-

tive and more effective so they can really dazzle their custom-

ers,’’ says Ram�on. If that means tweaking newly released

mobile tablets for an important sales presentation, IT will get

the job done.

From my perspective, the willingness to work closely with

the company’s business leaders and stay abreast of their con-

cerns is one of the key qualities that elevates Ram�on into the

ranks of genuinely transformational CIOs. It has also helped

him become a global ambassador for Kimberly-Clark.

‘‘My boss feels comfortable with me talking about the com-

pany in front of external audiences and he sees the value in

it,’’ says Ram�on.

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Chapter 5

The Customer-Focused CIO

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Back in the 1990s, terms like ‘‘customer-centric’’ and ‘‘cus-

tomer focused’’ were invoked to describe marketing

strategies based on satisfying the needs and desires of real

customers. After decades of product-centric marketing strate-

gies, the idea of building marketing strategies around what

customers really wanted seemed positively revolutionary!

Today, the idea of customer centricity seems like a no-

brainer. We are surrounded by examples of successful compa-

nies with customer-centric business models: Apple, Amazon,

Best Buy, Dell, eBay, and Google, to name just a few.

For a while, though, it seemed as though the trend would

be limited to customer-facing operations such as sales and

marketing. Gradually, however, it has proliferated across the

enterprise. Just recently, I had the pleasure of speaking with

Steve Phillips, senior vice president and chief information

officer at Avnet, one of the world’s largest distributors of elec-

tronic components.

Steve described an initiative called Avnet Express, a dedi-

cated e-commerce portal developed by the IT team to reach a

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specific group of desirable engineering customers. Here’s the

story in brief:

Avnet’s existing e-commerce capabilities were built to ena-

ble traditional business-to-business (B2B) selling scenarios.

That was fine for most customers. But a certain segment

of the customer base needed an e-commerce portal that

delivered more of a business-to-consumer (B2C) type of

experience. This customer segment was made up mostly of

designers—people who needed small numbers of compo-

nents for building prototypes.

The existing system was designed for larger-scale transac-

tions, and nothing was shipped until a full credit check was

performed, which is standard operating procedure in many

B2B situations.

But if you’re building and testing prototypes, you need

components quickly and with the fewest possible hassles. So

Avnet’s IT team developed a B2B portal for the designers that

looks and feels more like a B2C portal.

‘‘We make it easy for them to purchase the components

they need, and we offer them next-day shipping. It is very

practical, for them and for us,’’ says Steve. ‘‘What’s really been

interesting is that we’ve had to learn about user-friendly B2C

selling techniques—we had to learn about intelligent search,

online chat, enabled shopping lists, and other capabilities that

make it easier for customer to buy from us. Our epiphany was

to treat these customers like B2C customers, even though

they are technically B2B customers. We realized that their

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expectations had been shaped by sites like Amazon, and we

had to create a similar experience.’’

The result of this extra effort has been truly spectacular—

the site saw one-year revenue growth of nearly 200 percent

in 2010.

Another incredible benefit: The new e-commerce portal

had no negative impact on existing sales. In other words, it

was mostly all new revenue, with no cannibalization.

I really like Steve’s story because it opens up a new

dimension for IT. Instead of being purely focused on meeting

internal needs, IT gets to stretch beyond the limits of its tradi-

tional boundaries and focus on generating real value for the

business. After all, what can be more valuable than a satisfied

customer?

Top Line or Bottom Line?

My interviews with Kim Hammonds and Steve Phillips

reminded me of a friend who liked to say that no company

can save its way to greatness. He had worked at a large media

company that had essentially driven itself into mediocrity

through a strategy of continuous cost reduction. In the short

term, the strategy worked. Profits soared. The company

became the darling of Wall Street and its management was

praised as ‘‘visionary.’’

I’m sure you can see where this story is going. The com-

pany’s most creative and successful executives left. The

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quality of the company’s products declined. As a result, the

company lost market share. Sales revenue declined. Profits

declined. The company was eventually acquired by a compet-

itor and dismantled.

My friend’s story illustrates the danger of focusing so much

on the bottom line that you forget about the top line. Why do

companies exist? To make money. How do they make

money? By selling products or services—many companies

sell both products and services. Who buys what companies

sell? Customers. That’s why customers are important—they

make the cash register ring.

Customers generate sales revenue, and sales revenue—the

top line—is the lifeblood of all companies. You can’t have a

bottom line unless there’s a top line first. Any executive who

thinks the top line is ‘‘someone else’s problem’’ is missing the

whole point of why the company exists. The company does

not exist to create efficiency—the company exists to make

money, and the way you make money is by selling products

and services that customers want to buy.

This brings us back to a central question: What is the

appropriate role of the CIO in a modern organization that

competes in a rapidly changing global economy?

Driving Business Growth

My good friend Tim Crawford is vice president of information

technology and chief information officer at All Covered, a

division of Konica-Minolta Business Solutions USA. Tim has

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spoken at several of my CIO Executive Leadership events,

and his message is always clear: Transformational CIOS don’t

just ‘‘create value’’ for the enterprise, they drive revenue.

Tim is careful about making the distinction between activi-

ties that result in bottom-line gains and activities that focus on

the top line. For the past decade, CIOs have been expected to

focus primarily on driving down costs and leveraging technol-

ogy to make common business practices more efficient. There

is no question that efficiency is an important way to create

value for the business, but that’s not what Tim is talking about.

When Tim talks about creating value, he literally means

helping the business sell more products and services to its cus-

tomers. In other words, he’s talking about growing the value

of the customer base. He’s talking about the CIO contributing

to the top line, in addition to improving the bottom line.

For many IT departments, this implies a radical shift in per-

ception. For years, IT departments have been trained to see

internal users of IT as ‘‘customers.’’ There’s nothing wrong

with that—most people would rather be thought of as ‘‘cus-

tomers’’ rather than ‘‘users’’—but it constricts the range of IT

to a very limited universe of internal ‘‘customers.’’

Ideally, the IT department should see its customer base as a

combination of internal customers and external customers. The

internal customers are the traditional consumers of corporate IT

services. But the external customers are really the company’s

customers—all those wonderful people who pay money for

whatever it is that the company sells to generate revenue.

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This might seem simplistic, but it’s a key point of differenti-

ation between traditional IT strategy and transformational

IT strategy.

Transformational IT strategy is informed and guided by the

understanding that IT should add value internally (through

greater efficiency) and externally (through increased reve-

nue). Greater efficiency contributes to the bottom line; in-

creased revenue contributes to the top line.

Okay, now it’s probably fair to ask: Is all value created

equal? Is a penny saved really equal to a penny earned?

In other words, should the CIO focus on the bottom line,

the top line, or both? Is there a formula for determining the

right balance?

There isn’t a scientific formula—at least not today. The

appropriate balance will depend on the company’s strategy,

the market, the wider economy, and a host of other variables.

It does seem certain, however, that the CIO will be expected

to become an active participant in discussions that focus on

growing the business. That’s a big change from the past, and

it requires a different view of how value is created, both inter-

nally and externally.

The Rapid Enabler

As Randy Spratt suggested earlier, it’s all about finding the

right balance. It’s not a contest of top line versus bottom line,

because you need both to succeed.

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It’s also important to remember that no two companies are

exactly alike, so every company will have to find its own bal-

ance. The idea of balance also applies to the strategic role of

the CIO. In many companies, the CIO can contribute signifi-

cantly to the company’s long-term success by focusing pri-

marily on enablement and support.

This became clear to me after my conversation with Brian

Bonner, the CIO at Texas Instruments. Brian is a graduate

of the Fuqua School of Business at Duke University, and

before becoming TI’s global CIO, he was the company’s

vice president of analog acquisition integrations. In other

words, he was one of the guys responsible for making sure

that TI’s mergers and acquisitions (M&A) strategy was

successful.

Integrating the assets and resources of a newly acquired

company is not an easy task—just ask anyone who’s tried.

Doing it successfully—not just once, but many times—really

puts you in a league of your own. That’s one of the reasons

I believe that Brian’s point of view, based on his own experi-

ences, is so valuable.

Brian doesn’t believe that every CIO has to be transforma-

tional. In most cases, says Brian, being genuinely helpful to

the business is more than enough. For the CIO, being genu-

inely helpful means really understanding what the business

needs and how the business operates. It also means under-

standing how products and services produced or distributed

by the business are used by its customers.

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Different businesses have different strategies and different

operating models. When the strategy is sound and the opera-

tional model is sturdy, the CIO’s job is to support the status

quo. As the saying goes—if it ain’t broke, don’t fix it. The CIO

is still responsible for optimizing, streamlining, and improving

business processes. In most instances, fine-tuning an existing

process can be more helpful—and less disruptive—to the

business than a full-scale transformation project.

Texas Instruments (TI) designs and manufactures analog

and digital semiconductors and integrated circuits. TI serves

80,000 customers worldwide, helping them deliver consumer

and industrial electronics products with greater performance,

increased power efficiency, higher precision, more mobility,

and better quality.

‘‘We’ve got a good strategy here and we’re clicking along

and executing on it,’’ says Brian. ‘‘We focus on rapid enable-

ment. When the business has a good idea, we try to enable it

rapidly. When we come up with an innovation that will help

the business, we apply it very quickly. We are more closely

aligned with the concepts of operational effectiveness and or-

ganizational development than with transformation.’’

‘‘We focus on rapid enablement. When the businesshas a good idea, we try to enable it rapidly. When wecome up with an innovation that will help the busi-ness, we apply it very quickly.’’

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In our conversation, Brian cited the Hedgehog Concept

described by Jim Collins in Good to Great. I was delighted

to hear that, since Good to Great is one of my favorite

business books. It has stood the test of time, and Jim’s

words are still very relevant. Here’s an excerpt of Jim’s

writing:

The essence of a Hedgehog Concept is to attain piercing clarity

about how to produce the best long-term results, and then

exercising the relentless discipline to say, ‘‘No thank you’’ to

opportunities that fail the hedgehog test. When we examined

the Hedgehog Concepts of the good-to-great companies, we

found they reflected deep understanding of three intersecting

circles: (1) what you are deeply passionate about, (2) what

you can be the best in the world at, and (3) what best drives

your economic engine.

From Brian’s perspective, not every company needs a CIO

whose main focus is continuous transformation. If your

company’s business model is built on delivering a durable,

high-quality product that is difficult to design and manu-

facture, then it probably makes sense to focus more on oper-

ational efficiency and organizational development than on

transformation.

Brian also suggests that it’s time for people to stop wonder-

ing if the CIO has earned ‘‘a seat at the executive table.’’

‘‘If they think you can help, you will be invited to the

meeting,’’ he says.

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Own, Rent, or Both?

My friend Joe Weinman leads the communications, media,

and entertainment segment for Hewlett-Packard’s Worldwide

Industry Solutions. His team spans the Americas, Europe,

Middle East, Africa, Asia Pacific, Japan, and Australia.

Within the cloud computing community, however, he is

best known as the founder of Cloudonomics, a rigorous disci-

pline that combines business, technology, strategy, and eco-

nomics. Although no stranger to technology—Joe is an

accomplished inventor with 14 patents awarded—he is con-

sidered one of the world’s leading experts on the business

value of the cloud.

Joe notes that the valuation of cloud computing solutions

was initially focused on cost reduction, and then later on busi-

ness agility. ‘‘The term ‘business agility’ sounds like a good

thing, but it needs to be more quantitative to be a useful crite-

rion,’’ says Joe. ‘‘Moreover, ‘cost’ is not a simple metric, and

there are more business metrics that are useful—many of which

are surprisingly difficult to quantify, especially when you are

trying to pursue the correct decision for your business.’’

‘‘The term ‘business agility’ sounds like a good thing,but it needs to be more quantitative to be a usefulcriterion.’’

He also contends that much of the conventional wisdom

on the cloud is flawed. ‘‘There is a theory that public cloud

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computing is the end-state for all IT, and that the enterprise

data center is on the way out.’’ But Joe argues that, for a

variety of reasons, the future is much more likely to have

a mix of owned resources used in combination with public

services.

‘‘People own cars and rent them, they own houses and stay

in hotels, they have kitchens and they eat out in restaurants.

Generally, a mix of owned, dedicated resources and pay-per-

use services is the norm.’’ Moreover, Joe says, this blend is not

based on some ‘‘variety is the spice of life’’ platitude, but on

inescapable, rational, quantitative economics.

The best-known proponent of the ‘‘all IT will move to the

cloud’’ argument is probably Nicholas Carr. He argues that in

the same way that virtually all electricity comes from the

‘‘public’’ grid, rather than ‘‘private, on-premises generation,’’

virtually all IT will come from the ‘‘public cloud, rather than

private, on-premises data centers.’’

Joe points out, however, that electric utilities not only do

have economies of scale, but often have zero cost of goods

sold: The Hoover Dam doesn’t pay for each gallon of water

or its latent kinetic and potential energy. Those economies

of scale, and the lack of convenient distributed solutions,

mean that even after accounting for transmission and distri-

bution energy (and hard dollar) losses, and margin, selling,

general and administration (SG&A) expenses, uncollectible

accounts, and the like, the electric utility still offers a com-

pelling value proposition for most customers. However,

large power-hungry enterprises still do generate their own

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electricity, and emerging technologies such as home solar

panels and fuel cells are likely to tip the balance back to

private generation.

A better analogy, Joe argues, is the decision between own-

ing (or financing or leasing) a car and renting one. ‘‘A new

intermediate car probably costs about three hundred dollars

per month, either in lease, finance, or depreciation. That’s ten

dollars a day. Try renting that same car for that amount.’’ Joe

points out that even a large public service provider, such as

Avis or Hertz, may charge three to five times that, even

though they should have a roughly similar cost structure—

volume discounts, statistical effects, and so on—as a public

cloud provider.

The first lesson is that a service provider may cost substan-

tially more for a given unit of resource than owning it your-

self. The second lesson, however, is that paying more can still

be a good deal: a rational economic decision. If you use a car

every day, it’s probably cheaper to own one. But if you need

transportation only every once in a while, it’s probably

cheaper to rent a car or take a taxi.

‘‘The optimal decision is very dependent on the usage

profile,’’ he says. Frequent, unvarying use tends to favor an

ownership model. Variable, unpredictable use tends to favor

a short-term rental model. Even though the unit cost of the

‘‘rental’’ may be higher, it is the total cost of the solution

within a planning horizon that should be the key choice-

point.

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Multiple Models

In cloud computing, a variety of models are in use. Netflix, for

example, has moved all of its IT to the cloud, including

encoding and over-the-top on-demand video. But Zynga

uses the public cloud only in the early days of a new game;

once demand has flattened, it moves the workload back in-

house, to the so-called ‘‘Z cloud’’ private cloud. Other compa-

nies use in-house resources for core or traditional workloads,

while using the cloud for (highly intermittent) testing and

development.

Joe Weinman says that questions such as ‘‘Will all IT move

to the public cloud?’’ or ‘‘Is the cloud overhyped?’’ are the

wrong questions for CIOs to ask. Instead, CIOs should

be evaluating their current and planned enterprise application

architecture and determining which components should be

where and why.

‘‘Moreover,’’ Joe says, ‘‘unless you are a start-up, costs to

rewrite code or migrate applications and users need to be

factored into the decision.’’ And, except for unique business

functions where IT is a source of competitive advantage, you

should be looking to software-as-a-service (SaaS) providers

where possible.

‘‘Coding applications yourself goes far beyond the owner-

ship/rental decision for infrastructure. It’s like designing and

manufacturing your own personal car.’’ A vehicle from one of

the standard providers will probably meet most people’s

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needs just fine, especially now that most SaaS providers offer

a high degree of customizability on top of the base platform.

There are other benefits to using the cloud than just help-

ing to optimize total cost. One benefit is the ability to com-

press time without paying a premium. Because resources are

priced on a pay-per-use basis, one thousand server-hours

costs the same whether it is one server for a thousand hours

or a thousand servers for an hour. ‘‘To the extent that an ap-

plication is highly parallelizable, the public cloud gives you

something for nothing: the power to speed up results without

paying a penny more,’’ says Joe.

‘‘To the extent that an application is highly paralleliz-able, the public cloud gives you something for nothing:the power to speed up results without paying a pennymore.’’

A good example is when the Washington Post converted

Hillary Clinton’s schedule from a nonsearchable PDF of over

17,000 pages to a searchable archive, within hours, at a cost of

less than a hundred and fifty dollars. Virtually any company

can benefit from this ‘‘free time compression,’’ offering com-

pelling strategic advantages in competitive markets.

Also Consider the User Experience

Yet another often overlooked business benefit of the cloud is

an improved customer and user experience. ‘‘Commercially,

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an increasing portion of the economy is based on either on-

line ordering or online delivery, and internally, online appli-

cations, whether mobile or desktop, are a foundation of labor

productivity.’’ This includes everything from e-commerce and

e-auctions to e-books and tablet applications. In the enter-

prise, it may include contact center applications, white-collar

applications, mobile asset tracking, or mobile field force

applications to manufacturing applications.

In a commercial context, Joe notes that delays have been

shown to directly impact revenue: Google has determined

that a few hundred milliseconds of extra page load time result

in 20 percent fewer clickthroughs, directly resulting in a

20 percent revenue decrease. Joe argues that ‘‘today’s highly

interactive applications require a geographically dispersed

infrastructure to reach a global customer and user base.’’

Consequently, having server and storage resources deployed

around the globe running interactive applications is key.

Here again, Joe argues that the cloud can give you some-

thing for nothing. ‘‘Rather than expending scarce capital to

build a data center in every region, or in every country, it’s

much more cost-effective to use the cloud for content and

application delivery. If you use FedEx, UPS, or DHL for deliv-

ering physical content today, you already appreciate the ben-

efit of leveraging services available from a provider with

a global footprint. The public cloud does the same thing for

virtual content.’’

In summary, Joe says he does not have a deeply seated be-

lief in favor of or against the public cloud: ‘‘Enterprise data

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centers and cloud service providers each have a role to play.

The important thing is to understand your business, appreci-

ate the variety of benefits that the cloud can offer, and deter-

mine how best to integrate this new option into your overall

strategy.’’

‘‘Rather than expending scarce capital to build a datacenter in every region, or in every country, it’s muchmore cost-effective to use the cloud for content andapplication delivery.’’

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Chapter 6

To Cloud or Not to Cloud

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To cloud or not to cloud? That is not the question. We can’t

avoid the issue of cloud computing because cloud

computing is already here. And we can’t spend endless time

arguing and agonizing over cloud computing. The business

expects results, and it doesn’t really care whether we use the

cloud or not to deliver those results.

So let’s just agree that the cloud is not a ‘‘one size fits all’’

solution, that the cloud is not a complete solution, and that

every company will eventually have to develop its own

unique cloud strategy.

There is no standard process. No college or university

today offers a course in cloud migration. It’s a new field, and

the CIOs that I interviewed for this book are working hard to

figure out the best ways for leveraging the cloud to generate

value for the businesses they support.

Pat Toole is a general manager in IBM’s technology ser-

vices business. Before moving into this role, Pat was IBM’s

CIO. As CIO, he helped IBM navigate into the cloud.

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In addition to being a major provider of cloud services,

IBM is also a major user of cloud services. Part of Pat’s respon-

sibility as CIO was determining which services and capabili-

ties to move into the cloud. I asked him to summarize his

advice for CIOs who are trying to chart a course through

cloud territory. Here is what he told me:

Every so often in this industry, something comes along that

seems to generate its own momentum. The move to client-

server technology was an example of that kind of trend. It just

hit us by storm, and you felt that if you weren’t doing some-

thing to move from mainframe to client-server, you probably

weren’t doing something that you should be doing.

The truth is that you never want to get left behind when one

of these big waves hits. Sure, there’s a lot of hype. Some of the

economics might not pan out the way you thought it would.

Each company will have to wrestle with this in its own way to

make sure that it provides the proper return on its investment.

When we consider moving a workload into the cloud, we

look at three components. First we look at the current cost ver-

sus the target cost and the time it will take us to get there.

Second, we look at the actual cost of moving from the

current model to the target model.

Third, we look at the potential benefits we will gain by

moving that workload into the cloud. Will there be improved

utilization? Will the labor costs be lower? Will there be a higher

level of standardization?

All of this wraps up into our calculation of the cloud’s value

in terms of that workload. That’s how we do ‘‘cloudonomics’’

here. We break it down into components that we can analyze.

It’s not rocket science, but it is computer science.

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And we see the challenge from both ends, because we use

cloud technology and we also provide services and products

via cloud technology. It’s very exciting for us to work on both

sides of the cloud.

Pat says there’s still low-hanging fruit in the cloud, but you

have to know where to look:

You have to pick a point of entry where you can gain traction

and be successful. Look first at application development test-

ing, business analytics, collaboration, Web serving, and

maybe virtual desktops. I would avoid areas like traditional

ERP and financial management applications as entry points.

I think this is great advice from a guy who has been there

and done that. In The Transformational CIO, I described how

Pat made sure that IT was aligned with the company’s

earnings per share goals. I remember being impressed by his

analytic approach to managing IT. I’m not surprised that he

took a similarly analytic approach to managing the cloud.

Fail Fast, Fail Cheap

We’ve all heard the phrase, ‘‘Fail fast, fail cheap,’’ but most of

us tend to believe that it applies to someone else. Let’s face it:

Nobody wants to fail, so we spend most of our careers trying

to avoid failure.

At the risk of sounding like some kind of New Age guru, it’s

important to remember that failure is the mother of success.

We learn more from our mistakes than from our triumphs.

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Thanks to modern technology, we can test our ideas

much more rapidly and much less expensively than at any

time in the past. Rapid prototyping is no longer an exotic

process—it is becoming increasingly common. Fairly soon,

it will be considered a standard methodology for develop-

ing new products and services. I recommend reading

‘‘A More Rational Approach to New-Product Development,’’

an article published in the March 2008 edition of Harvard

Business Review. Although the article focuses on new-

product development in the pharmaceutical industry, the

general concept it describes can apply to any competitive

business.

Basically, the article suggests that it’s better to divide the

new-product development process into two stages: an early

stage in which you evaluate potential and identify risks, and a

second stage in which you actually move the new product or

service closer to launch.

The goal of the first stage is ‘‘truth seeking’’ and quickly

eliminating ideas that don’t seem likely to succeed. Only

ideas that survive this first stage are moved along into

the second stage, where they are subjected to thorough

evaluations.

The second stage is ‘‘success seeking,’’ and it is more

intensive—and considerably more expensive—than the first

stage. The authors of the article suggest that the early stage

costs are one-fifth to one-fiftieth the costs of later-stage test-

ing. That’s a significant difference, and it provides a good

foundation for arguing in favor of using a staged approach.

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While the two-stage strategy might seem like common

sense, the truth is that many organizations take an ‘‘all or

nothing’’ approach to testing new products and services.

The traditional approach assumes that innovation is a

‘‘dark art’’ and not a process, and that it’s best left to small

groups of dedicated ‘‘innovators.’’ In times past, when the

speed of innovation was slower and markets were less frag-

mented, the old approach made sense. But it doesn’t make

sense today.

Separating new-product development into two discreet

phases saves time and money, since the first phase is quicker

and less expensive than the second phase. The two-stage

approach also increases the chances of successful new-

product launches, because ideas that are likely to succeed are

identified earlier in the process. The traditional approach

doesn’t separate the winners from the losers until the end of

the process. In today’s hyper-competitive markets, the tradi-

tional approach seems both slow and risky.

A Skunk Works in the Cloud

For decades, the term ‘‘skunk works’’ was associated with

Clarence ‘‘Kelly’’ L. Johnson, the legendary designer at

Lockheed Aircraft Corporation. The skunk works legend is so

powerful that the name has been trademarked and is now

used officially by Lockheed Martin’s Advanced Development

Programs.

The group that became the Skunk Works1 began in 1943

as a small team of young engineers within Lockheed. The

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team’s initial assignment was developing a jet fighter

that would counter the jets under development in Nazi

Germany. Working in a rented circus tent, Johnson and his

team broke practically every rule in the book. But they

delivered the XP-80 Shooting Star—America’s first jet

fighter—in just 143 days.

The success of the XP-80 project led to more assignments.

Over the years, the team designed and delivered famous

airplanes such as the F-104 Starfighter, the U-2, the SR-71

Blackbird, the F-117 Nighthawk, and the F-22 Raptor.

Johnson’s amazing team of innovators began work in a

rented circus tent. Today, you can be innovative without leav-

ing your office.

That’s because the cloud is ideally suited for testing and

evaluating new products and services. The cloud enables you

to fail fast and fail cheap, because you don’t have to buy

anything except the capability you need to perform the test.

You don’t have to invest in new infrastructure or lots of new

software—you buy exactly what you need to run the test and

not a bit more.

With the cloud, you can create a real innovation pipeline,

at far lower costs than ever before. This is the true value of

the cloud—it’s the least expensive test bed ever invented.

In the old days, your skunk works had its own physical

space, along with desks, furniture, equipment, support

staff, and so on. Today, your skunk works can live in

the cloud.

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Weaving the Seamless Tapestry

I think it’s appropriate to conclude this section of the book

with a visit to Martin Davis, the executive vice president and

head of technology integration at Wells Fargo. Davis and his

team led the technology integration required after the merger

of Wells Fargo and Wachovia. The merger created a financial

services organization with 70 million banking customers,

$1.3 trillion in assets, 275,000 employees, 80 lines of business,

and more than 4,000 applications.

Weaving these strands together to form a seamless tapes-

try posed complex challenges, but as a seasoned veteran of

previous mergers, Martin had the experience and the

knowledge necessary to manage the process smoothly

and successfully. Before heading the integration effort,

he was CIO at Wachovia. Prior to that, he had served in a

variety of executive roles at the bank, including SVP and

group executive of Information Services Architecture and

Administration; SVP and group manager of Capital Markets

Technology; and SVP and group manager of Bankcard

Technologies. In 2001, he helped oversee the Wachovia–

First Union merger, which also involved a highly complex

integration process.

Part of every integration challenge is identifying which

systems to keep running and which systems to close down.

In this regard, the Wells Fargo–Wachovia merger was no

different. In some instances, it made more sense to keep the

Wachovia system and shutter the Wells Fargo system. In other

cases, the opposite was true.

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But what elevated the integration process to truly

Herculean proportions was its sheer size and scope. No

single human can manage a project of that size, so team-

work is absolutely essential. But you can’t just tell people to

work together; you need to give them common goals.

Here’s what Martin told me when I asked him about his

leadership style:

One of the key lessons I’ve learned over the past 26 years is that

the more you can share the big picture with people, the more

likely they are to succeed. When you think about the size and

scale of our organization, it’s critical for people to have a good

sense of the big picture and the common purpose.

Understanding the big picture enables us to innovate so

quickly for our customers and improve the way we deliver

services. I use the analogy of building a house. The plumber

will do a better job if you show him plans for the entire

house instead of just telling him that you want three

bathrooms.

From my vantage point as leader of the technology integra-

tion office, I can see how critical it is for everyone to know the

master game plan and understand their role. There are a lot of

moving parts. When you change something, you have to un-

derstand the impact of that change on parts of the company.

It takes a lot of coordination.

‘‘Understanding the big picture enables us to innovateso quickly for our customers and improve the way wedeliver services.’’

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One of the ways Martin keeps up with the hectic pace of

change is through a weekly report on the various changes

taking place across the company’s extensive IT portfolio:

We call it the ‘‘Airspace Analysis Report,’’ and it really helps us

keep the integration process running smoothly. Three teams

look at the report, and they look for situations where an inte-

gration change could have an impact in their ‘‘air space.’’ It’s

like being a flight controller—you want to keep the planes

from colliding.

But at the end of the day, it’s really all about teamwork.

We’re all focused on serving our customers and providing

them with the financial services they need. That’s our common

purpose.

Martin used the word ‘‘customer’’ many times over the

course of our conversation. His understanding of the big

picture is crystal clear. And it made me reflect on how IT

has evolved into a lot more than just a component of financial

services.

Honestly, can you imagine a bank without IT? I think it’s

safe to say that in most instances, IT has become the primary

product that banks deliver to their customers. When you

use an ATM or pay a bill online or access your account

balance from your mobile phone—that’s an IT product

you’re tapping into.

So it’s totally appropriate for the IT teams at Wells Fargo to

think of their main job as serving the bank’s external

customers!

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‘‘But the winning financial institution will be the onethat serves its customers best. When I wake up in themorning, I’m not thinking about what kind of newtechnology I should buy—I’m thinking about how wecan serve our customers better.’’

Toward the end of our conversation, I asked Martin to list

the main challenges facing IT executives in today’s ultra-

competitive financial services markets. Here’s what he told me:

You have to attract the best talent. That’s key, because you

cannot execute unless you have great teams. And the ability to

execute is absolutely critical in this industry.

But the winning financial institution will be the one that

serves its customers best. When I wake up in the morning, I’m

not thinking about what kind of new technology I should

buy—I’m thinking about how we can serve our customers

better. That’s a different way of looking at the world. It’s part

of our culture here. It gives us a competitive advantage.

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Part II

Driving Change

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Chapter 7

In Front of the Firewall

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Everyone, it seems, has their own view about the evolution-

ary stages of IT. It usually sounds something like this: First

came the mainframe era, then the client-server era, then the

PC era, then the Internet era, then the service-oriented archi-

tecture (SOA) era, then the cloud era . . .

But after speaking recently with Esat Sezer, I decided that

you can collapse the history of IT into two major eras. Let’s

call them ‘‘The Era of IT Behind the Firewall’’ and ‘‘The Era of

Converged Technologies.’’

The first epoch included the Age of the Mainframes and the

Age of Distributed Computing. The new era—the one we’re

experiencing today—is marked by four transformational

trends in computing: mobile, cloud, social, and big data.

Esat, as many of you know, is the senior vice president and

CIO at Coca-Cola Enterprises, the third-largest Coca-Cola bot-

tler in the world. Its beverage portfolio includes energy

drinks, still and sparkling waters, juices, sports drinks, fruit

drinks, coffee-based beverages, and teas. The company’s

markets include the United Kingdom, France, the Nether-

lands, Norway, and Sweden.

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Esat was born, raised, and educated in Istanbul. Before

joining Coca-Cola, he held senior IT management posts at

Whirlpool, Colgate-Palmolive, and Andersen Consulting in

London. I mention his bio because it shows that he’s been

around the block—and as a result of his experience, he

has developed the keen perspective of a truly seasoned

global technology executive. I value that perspective, and

that’s why I’m happy that Esat agreed to share his insights

with us.

‘‘For the first time in my career, I see IT moving from the

back office to the front lines,’’ says Esat. ‘‘It’s great to have

lean and streamlined processes, but the days of competing on

the basis of efficiency are over. Most everyone has efficient

processes now, so they’re no longer a competitive advantage.

It’s not about the ERP system or the billing system or the

order-to-cash system anymore. Those systems are important,

but you can’t compete on them.’’

In today’s hyper-competitive markets, IT generates

value by enabling business growth. That means the CIO

has to be linked tightly to the business. The CIO must have

excellent relationships with the CEO and the board of

directors, and must be able to make the business case for

investing in IT.

‘‘The success of the business depends on the success of IT,’’

says Esat. ‘‘Technology is the key enabling function. IT is tied

to sales, marketing, distribution, supply chain—everything

the business needs to be successful. So the CIO needs to

understand the challenges of the business, understand the

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markets and how the business sells in those markets. The CIO

needs to translate technology into business advantages that

will differentiate the company from its competitors. CIOs

who cannot do that will not be successful—and their compa-

nies will not be successful.’’

‘‘The success of the business depends on the successof IT.’’

Esat advises CIOs to get out from behind the firewall and

embrace the challenges of dealing with customers. ‘‘That’s

where the action is—out in front, with the customers,’’ he says.

The four transformational technology trends of the current

epoch—mobile, social, cloud, and big data—are all taking

place in front of the firewall. These converging trends

are driving a revolution in customer expectations. Today’s

customers not only want great products—they want great

experiences.

Coca-Cola Enterprises is a great example of a company that

uses IT to enable its business units to do a better job of inter-

acting with customers—both online and offline. The com-

pany has issued mobile devices to 15,000 of its merchandisers

to help them get the right mix of products to the right stores

ahead of the competition. And the company uses its growing

social media clout to launch large-scale marketing campaigns

directly from social media platforms such as Facebook, where

25 million consumers have self-identified by ‘‘liking’’ its fan page.

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The company also leverages its IT capabilities to get the most

from its sponsorship of globally watched events such as the

World Cup and the Olympics.

It helps that Esat reports directly to the company’s CEO,

John Brock. ‘‘That puts me at the table,’’ says Esat. ‘‘There is

no business plan that is not aligned with our technology capa-

bilities. We don’t have a separate IT plan—we have an inte-

grated business plan. The integration starts at the top, with

the relationship between the CEO and the CIO.’’

Sitting at the table is one thing—staying there is something

else, says Esat. The CIO must work hard to develop and main-

tain strong connections to the C-suite and the board of direc-

tors. It’s not just a matter of the CIO’s survival—those

relationships are also absolutely critical to the company’s

health and well-being.

‘‘If the CIO does not have direct links to the CEO and the

board, there is no way the company can gain value from the

technology transformations taking place. The company will

very quickly find itself in the hands of consultants. It will take

longer and be more costly for the company to make the tech-

nology transformations it needs to be competitive,’’ says Esat.

‘‘The CIO must be connected to the business in order to un-

derstand how technology can provide the greatest value and

help the business achieve its goals. That’s the biggest differ-

ence I see among CIOs—some want to be technology leaders

and others want to be business leaders. But to succeed, you

need to be both.’’

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‘‘The CIO must be connected to the business in orderto understand how technology can provide the great-est value and help the business achieve its goals.That’s the biggest difference I see among CIOs—some want to be technology leaders and others wantto be business leaders. But to succeed, you need tobe both.’’

Esat’s close relationships with the company’s senior man-

agement and board have enabled him to create what he de-

scribes as a ‘‘culture of experimentation.’’ By continuously

experimenting and adopting an array of newer technologies,

the company has stayed ahead of the competition.

‘‘We developed a mobility architecture in four months that

allows us to communicate with our merchandisers and get

products in the stores faster than our competitors. We

couldn’t have done it without the cloud,’’ says Esat. ‘‘We’ve

also moved all of our e-mail, our employee portals, and some

of our development platform into the cloud. We use big data

to get real-time feedback from our customers. We use social

media to market our products to millions of consumers. We

work closely with emerging technology vendors to experi-

ment, learn, and innovate.’’

Some of these newer vendors could mature into future

strategic partners, says Esat, joining traditional suppliers

IBM and Microsoft in a new ecosystem of transformational

IT providers.

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When you chat with Esat, you can easily sense his passion

and energy. He is a true believer in the transformational

power of IT leadership.

Avon Calling

One of my favorite stories about using the cloud as a test bed

for innovation was told to me by Donagh Herlihy, the SVP

and CIO at Avon Products. Here is the background: Ranked

226 in the Fortune 500, Avon Products is the world’s top direct

seller of cosmetics and beauty-related items. I think it’s fair to

say that Avon’s sales model is unique. Its independent sales

force includes thousands of sales leaders, who in turn super-

vise the efforts of over 6 million sales representatives

worldwide.

As you can imagine, moving real-time business information

among this many people can be a challenge. In 2008, Avon

decided that its global sales network needed a single,

standardized information and reporting platform. Here’s how

Donagh describes the challenge:

We knew that the new platform had to be action-oriented, pro-

vide immediate value, and be very easy to use. All representa-

tives are independent entrepreneurs and many work part-

time, so we couldn’t have a system that required a massive

training program. The system had to be simple, and it had to

be fairly intuitive. It had to be Web-based, so people could use

it on their home computers or smart phones.

We wanted an application that would generate a ‘‘to-

do list’’ for the sales leaders every morning . . . not a static

list, but a list based on where they were in the sales cycle,

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something that would show them which of their reps had not

placed an order in that campaign, or had placed an order

under the minimum threshold for generating a commission

payment to the leader, who was late paying for an order . . .

who was high potential and looked like they could (with the

right encouragement and coaching) be promoted into leader-

ship, who had attended a sales training event, and who had

missed the event. We wanted to help them coach their reps

more effectively and help them do a better job.

Avon studied the challenge diligently and considered

several ways of moving forward. After careful consideration,

the company narrowed the field of choices to three options.

Here is Donagh’s recollection of the decision-making process:

We looked at building the application ourselves and hosting it

internally, which would have been the traditional Avon way.

We considered working with a traditional software vendor

to develop the application. In that case, we could have hosted

the application internally or had the vendor host the

application.

We also looked at Salesforce.com, which was for us the un-

conventional choice at the time. It was also the least capital-

intensive option.

Eventually, Avon chose Salesforce.com to develop the proj-

ect. But capital avoidance was not the primary driver behind

the company’s decision to move into the cloud. Donagh

explains:

Speed was the number one consideration. The economics were

secondary. Going to the cloud meant we could begin testing

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the concept in weeks, without putting added stress on our IT

organization or on our existing IT infrastructure. We could

focus our energy and attention on the application itself, and

that really narrowed the scope of the project.

Of course, it was also a very economical choice. But we

made the decision based on speed to market. It was important

to get the application up and running quickly.

In addition to speed and economy, there was a third con-

sideration: We didn’t have to overthink the project. Say, for

example, that it hadn’t worked in the test market. Then we

would have said, ‘‘Okay, it’s not working, this was a bad idea,

let’s stop and regroup.’’ We could have done that, if necessary,

because we hadn’t invested in a lot of new infrastructure and

software licenses, etc.

With the cloud model we were paying a fee per user per

month, and if the application did not deliver we could fail

quickly, stop the payments. We would have no investments to

write off versus a traditional capital-intensive IT development.

The project was successful in its initial tests. The first pilot,

in Eastern Europe, was fully developed and deployed in five

months. The pilot was followed by successful deployments in

markets in Western Europe and in Asia. As I’m writing these

words, Avon has rolled out the application to over 25 markets

and counting.

‘‘By using a cloud model, we didn’t have to worryabout scalability, usage patterns, capacity planning,monitoring, or provisioning infrastructure. We inher-ently got the economics of a shared tenancy model.’’

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Fine-tuning the application and focusing on the data to

meet local business requirements and global operating stan-

dards was crucial to the success of the project. Avon didn’t

have to spend lots of time worrying about the project’s infra-

structure because the infrastructure was in the cloud.

By using a cloud model, we didn’t have to worry about scal-

ability, usage patterns, capacity planning, monitoring, or

provisioning infrastructure. We inherently got the economics

of a shared tenancy model.

As a consequence, Avon could focus on refining the details

that were critical to its sales network. Focusing on those de-

tails contributed to the system’s overall usability, which led to

rapid adoption and usage by the sales leaders.

In retrospect, says Donagh, it seems inevitable that the

cloud was the proper choice. But at the time Avon made its

decision, the choice wasn’t so obvious. After weighing the

pros and cons, Avon bet on the cloud—and the bet paid off.

The application drives sales revenues in the countries where

it is used, due to the increased productivity of the sales lead-

ers and their downline teams. In Donagh’s own words, ‘‘It’s a

phenomenal payback, a game changer.’’

When the Model Fits

Dave Smoley is SVP and CIO at Flextronics, a Fortune Global

500 design, manufacture, distribution, and after-market ser-

vices company. Based in Singapore, Flextronics operates in

30 countries—it is truly a global enterprise.

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Complexity can become a challenge for large companies.

Smart companies strive for speed and simplicity whenever

possible. That’s one of the reasons that Dave feels comfort-

able using cloud technology—it fits nicely with the com-

pany’s strategic model.

‘‘We’re all about keeping it simple,’’ says Dave. ‘‘In a cloud

model, the provider is responsible for development, configu-

ration, and support. The traditional model requires a much

larger IT organization because you need administrators, proj-

ect managers, business analysts, and other people to support

the software and hardware.’’

‘‘Today, the cloud can provide turnkey services andcapabilities. You don’t have to buy servers. You don’thave to care whether an application is running on Javaor Visual Basic. You can use any printer or anybrowser. The cloud simplifies IT. You could even saythat it commoditizes IT.’’

With four SaaS implementations under his belt, Dave is a

cloud veteran. I asked him to describe the company’s deci-

sion to adopt Workday as its HR solution. Here’s a summary

of what he told me:

IT is inherently complex. You need hardware, operating sys-

tems, drivers, utilities, applications, databases, and networks.

Thirty years ago, you wrote your own programs in low-level

assembly languages. Over time, the technology became more

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abstract, more high level, and more integrated. It’s been an

evolution.

Today, the cloud can provide turnkey services and capabil-

ities. You don’t have to buy servers. You don’t have to care

whether an application is running on Java or Visual Basic.

You can use any printer or any browser. The cloud simplifies

IT. You could even say that it commoditizes IT.

In IT, our job is solving business problems. Today, we will

look first to a cloud solution, second to a traditional solution,

and third to a custom-developed application. We will look at

all three, but the underlying assumption is that the cloud is

the first choice. When someone on my team sends me a recom-

mendation, I expect to see two or three cloud offerings identi-

fied in the analysis.

Part of our decision to use Workday was based on my con-

viction that it was the right thing to do. And part of the deci-

sion was based on our corporate culture. As a tech company,

we are more open to taking risks. We are also more aligned

with the basic value proposition of the cloud—speed, simplic-

ity, and lower costs. So I felt confident about pushing the

envelope.

We estimated that using a cloud solution would result in a

30 to 50 percent reduction in total cost of ownership, com-

pared to a package solution from a traditional vendor. On top

of that, we looked at usability, and Workday was much more

usable than the traditional solutions. Because it was less com-

plex than a traditional solution, we would need fewer IT

people in IT and HR to support it.

It also helped that Workday was located down the road

from us. Our CEO, Mike McNamara, and I met on a Saturday

morning with Workday’s co-founders, Dave Duffield and

Aneel Bhusri. They are very credible, trustworthy, and

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sincere guys. Their reputations are impeccable. We came out

of the meeting and said, ‘‘These are the kind of people you

want to be in business with.’’

Here’s something else: If we had delegated this decision to a

committee, it never would have happened. It would’ve been

killed, because Workday is a small company and the IT team

is used to dealing with big companies. A committee would

have considered this too risky.

We implemented Workday almost completely on our own.

In the first year, we had some help from the Workday team.

We didn’t depend on third-party integration partners. We did

most of the implementation by ourselves.

And the result was a savings in the range of 30 percent.

We took 80 HR systems and replaced them with one system.

I consider it one of the premier accomplishments of my career.

I love this story because it captures so many aspects of the

new cloud model—the speed, the simplicity, and the reduced

costs. I included a version of this story in my first book, The

Transformational CIO, and I really wanted to re-examine it

from a cloud perspective in this book. I’m delighted that

Dave had the time to retell the story and add more significant

details. Thank you, Dave.

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Chapter 8

The New Speed of Change

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O n May 23, 2011, Toyota Motor Corporation (TMC) and

Salesfor ce.com announced a strategi c alli ance to buil d

‘‘Toyota Friend,’’ a private social network for Toyota custom-

ers and their cars. Toyota President Akio Toyoda offered this

observation: ‘‘Social networking services are transforming

human interaction and modes of communication. The auto-

mobile needs to evolve in step with that transformation. I am

always calling for Toyota to make ever-better cars. The

alliance that we announce today is an important step forward

in achieving that goal.’’

By coincidence, I had scheduled a telephone interview

with Barbra Cooper, group VP and CIO at Toyota North

America, for the next day. Sometimes, you just get lucky!

In her current role at Toyota, Barbra is responsible for the

strategy, development, and operation of all systems and tech-

nology that support Toyota in the North America region.

Cooper also heads the University of Toyota, located in

Torrance, California, which provides training and education

for Toyota associates, as well as Toyota and Lexus dealerships

and distributors globally.

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She is also part of the leadership team that develops and

nurtures innovative projects such as Toyota Friend. Here’s

some background information from the company:

Toyota Friend will be powered by Salesforce Chatter, a private

social network used by businesses, and will be offered, first in

Japan, initially with Toyota’s electric vehicles (EV) and plug-

in hybrid vehicles (PHV) due in 2012.

Toyota Friend will be a private social network that connects

Toyota customers with their cars, their dealership, and with

Toyota. Toyota Friend will provide a variety of product and

service information as well as essential maintenance tips, cre-

ating a rich car ownership experience. For example, if an EV

or PHV is running low on battery power, Toyota Friend would

notify the driver to recharge in the form of a ‘‘tweet’’-like alert.

In addition, while Toyota Friend will be a private social net-

work, customers can choose to extend their communication to

family, friends, and others through public social networks

such as Twitter and Facebook. The service will also be accessi-

ble through smart phones, tablet PCs, and other advanced mo-

bile devices.

To date, TMC has developed its own telematics services to

connect people, cars, and their surroundings. Through Toyota

Friend, TMC aims to offer its telematics services worldwide.

Moving forward, TMC plans to advance toward the realiza-

tion of future mobility by teaming up proactively with global

IT companies.

Although TMC and Salesforce.com will launch their part-

nership with the building of Toyota Friend, in the future the

companies plan to develop cloud services for TMC’s open plat-

form and create new business opportunities leveraging their

respective strengths.

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Salesforce.com and TMC will each make investments in

Toyota Media Service Co. (TMS), which oversees TMC’s

global cloud platform development. S alesforce.com will

invest 223 million yen and TMC will invest 442 million yen.

Microsoft Corporation, which on April 6 (2011) announced

a strategic partnership with TMC to build a global platform

for next-generation telematics services, will invest 335

million yen.

If you needed an example to illustrate how big companies

are leveraging the convergence of cloud, mobile, and social

computing technologies to create new business opportuni-

ties, this is it.

And it’s not a bunch of marketing hype. Alliances such as

this one represent more than just business as usual—they are

the future of business.

And that’s one of the reasons I was delighted to interview

Barbra the day after Toyota and Salesforce.com made their

announcement. The timing was perfect.

In many ways, Barbra is an archetype for the modern trans-

formational CIO. She has an impressive resume and a long list

of accomplishments. In 1996, McGraw-Hill Publishing named

her as one of the Top 100 Women in Computing. Computer-

world listed her among the Premier IT Leaders in 2001. She

received a CIO 100 Award in 2005 from CIO magazine. Ziff

Davis’s CIO Insight magazine ranked her sixth of the top 100

global CIOs in 2007, and CIO magazine’s Executive Council

awarded her the Distinguished Member Award for Most

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Valuable Content. In the same year, she was inducted into the

CIO Hall of Fame.

But she doesn’t spend a lot of time looking in the rearview

mirror. Like a winning race car driver, she’s already looking

ahead to the next series of turns on the track.

In our conversation, Barbra compared the current cycle of

transformational change with the previous cycle. Here is a

summary of what she said:

I’ve watched several big cycles of change and transformation.

The cycle we’re experiencing today reminds me of the cycle

that occurred when the PC was introduced in the workplace.

That first wave of personalized technology had a profound

impact on the corporate business model.

Although the changes were dramatic, they occurred rela-

tively slowly. The software evolved over years, and it was still

tethered in many ways to the old world of green screens and

batch processing. Today, change happens much more quickly.

I think the biggest difference between then and now is that

today’s end user is far more independent. The newer technol-

ogy offers them much more personalization and indepen-

dence. When you combine that with the very rapid product

development cycles of various technologies, it raises some

very serious issues about how we manage IT and how we

adapt to change.

My generation of IT leadership was all about control.

Fundamentally, our goals were achieving reliability and pre-

dictability. So we created limits and standards that enabled us

to manage the reliability of complex systems and keep the costs

of those systems under control.

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Much of that has flipped over the years. You don’t have so

much control as you had in the past. And you can’t manhan-

dle the workforce like you could in the past. You can’t tell a

new employee they have to work here 10 years before we’ll give

you a BlackBerry.

The old tricks won’t work in today’s environment. The mil-

lennials entering the workforce have been consuming technol-

ogy for quite a while. They’ve watched industries adapt to the

needs of the modern consumer. They are much better

informed than their predecessors. They want to custom design

their own jeans and configure their own cars. How can you

tell them they can’t have something when they can get

whatever they want through the back door in 10 minutes?

That’s the biggest challenge I see coming for IT leaders

today. And while it might sound like a governance issue or a

policy issue, it’s fundamentally deeper.

The root of the problem is data, says Barbra. All of

our technologies—devices, systems, networks—generate a

fantastic amount of data. The modern world runs on data,

and there’s a growing awareness that data is valuable.

‘‘The old tricks won’t work in today’s environment.The millennials entering the workforce have been con-suming technology for quite a while. They’ve watchedindustries adapt to the needs of the modern consumer.They are much better informed than their predeces-sors. They want to custom design their own jeans andconfigure their own cars. How can you tell them theycan’t have something when they can get whateverthey want through the back door in 10 minutes?’’

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Data are a by-product of every product and service we pro-

vide or consume. The data explosion is profoundly altering

the way we look at all aspects of modern business. The

impact of all this on the CIO is inescapable.

In the past, CIOs were primarily valued for their ability to

provision service. A good CIO interpreted the needs of the

business and provided the technology required to meet those

needs. IT was (and in some organizations still is) seen as a

utility, not much different from electricity or running water.

But in an information economy—an economy in which the

data surrounding a product or service are perceived as being

more potentially valuable than the product or service itself—

the CIO’s role is very different.

In a globalized information economy, the CIO’s role is

(or should be) less about provisioning IT services and more

about providing information that can be used by the enter-

prise to create value through innovation.

Here’s the net takeaway: In the old days, the CIO drove

value through efficiency. Today, the CIO drives value through

innovation. This trend is especially visible in the automotive

industry, as Barbra notes:

This market has leveled out in many ways. The niches have

pretty much been filled. There’s a finite number of ways you

can bend metal. Most cars are basically similar. How do you

get an edge or a competitive advantage in the market? We

have to differentiate ourselves in new ways.

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We’re trying to see the car from the perspective of consumers

who are text messaging and communicating with their

friends and family through social media. We’re figuring out

how to get into that space and customize the experience for

our customers. We’re doing it their way, as opposed to just say-

ing, ‘‘Okay, here’s the car, get in.’’

And that’s why we’re working with suppliers like Salesforce.

com and Microsoft in alliances that look more like joint ven-

tures than traditional vendor/customer relationships. We’re

innovating from all sides, instead of saying, ‘‘Here’s what we

want, now go do it for us.’’

I find it absolutely fascinating how the innovation process

mirrors the market. The alliances described by Barbra reflect

the realities of today’s consumer-driven markets.

Modern markets, to varying degrees, are self-organizing.

Because modern markets change so quickly—too quickly,

according to some—traditional command-and-control struc-

tures just get in the way.

This general rule applies to all kinds of organizations.

When things change very slowly (like during the Middle

Ages), an inflexible, top-down hierarchy will get the job

done. When things change extremely rapidly, organizing

structures must be flat and flexible, or they will be overrun.

Updating the Mental Model

During my conversation with Barbra, we spoke about the dif-

ferences among past, present, and future generations of IT

leaders. Many of the CIOs we know earned their stripes by

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overseeing the implementation of large-scale ERP systems.

Those ‘‘once in a lifetime’’ projects were truly transforma-

tional, and they permanently changed the landscape of IT.

The Herculean struggles over ERP have largely subsided.

You rarely hear debates or arguments over ERP any more.

Once considered revolutionary, ERP is now the norm in

large companies. The next generation of CIOs won’t spend

their days and nights worrying about ERP—they’ll have other

fish to fry.

There’s an old saying that generals always try to fight the

last war. I suppose that it’s human nature to take comfort in

the familiar. We’re all creatures of habit, and deep down, we

hate change.

But the world has changed, and there’s a limit to what we

can learn from history. Making the most of newer technolo-

gies such as cloud, social, and mobile computing will require

new leadership strategies. More pointedly, perhaps, it will

require a new way of looking at the relationship between IT

and the enterprise. Here is what Barbra told me:

IT is being increasingly disintermediated. Within the next

couple of years, the business will be able go out and directly

source almost any IT service that it needs. We’re not talking

here about one or two rogue business units going around IT.

We’re talking about the whole corporation—all of your inter-

nal customers, and all of their customers.

The pressure to change is coming from all sides. The old CIO

mental model is not sustainable. I know people who are just

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digging in deeper, putting up fences, and hoping for the best.

But that won’t work. We need a new mental model for the

CIO. We need to develop that new model, and then we need to

build to it—aggressively.

Defining the new model, fleshing it out, making it real, and

putting it to work won’t be easy. This is a pivotal moment for

CIOs. Transforming IT from its current state to its future state

will require making a break with the past. It will take original

thinking and genuine leadership to create the next generation

of IT, but it needs to be done.

Failing to commit the time, energy, and resources neces-

sary to build a new IT model would be irresponsible. I think

it’s fair to say that if the CIO doesn’t step up and take the

primary leadership role in building the new model, someone

else will.

I think it’s important to emphasize the need for reexamin-

ing past practices and old strategies. Toyota, which built its

business on quality control and continuous process improve-

ment, is now focusing more of its energy and resources on

innovating for its customers. That is a sharp break from the

past, in which innovation was usually reserved for improving

internal processes and reducing costs.

Kaizen is the name for this philosophy of continuous pro-

cess improvement. No company embodied the spirit of kai-

zen more than Toyota. But as one top auto executive recently

said, ‘‘You can’t kaizen your way into the competitive global

marketplace.’’

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In a continuously changing economy, efficiency can only

take you so far. Now is the time for innovation. That much

seems clear.

But let’s do a quick reality check: Most CIOs still focus pri-

marily on efficiency, consistency, and reliability. Innovation

scares them. Innovation is hard to predict and difficult to

control. If you see your primary role as being the person in

charge of making sure that everything runs smoothly, innova-

tion can look a lot like the enemy. And that’s the problem.

Frankly, I don’t see anything wrong with looking at innova-

tion as a problem. As we all know, every problem can be

managed. That means that you can manage innovation.

At the risk of stating the obvious, you will need some kind

of process for managing innovation properly. You will need

to invent the process and customize it for your own company.

The best way to start is by forming an innovation process

committee. I suggest recruiting members of your IT leader-

ship team to form the nucleus of the committee. Here are

some questions for them to consider at the committee’s first

meeting:

1. How do we move from an efficiency mind-set to an

innovation mind-set?

2. How do we shift the organization’s focus from improv-

ing internal processes to putting smiles on the faces of

external customers?

3. How do we learn to embrace change instead of fearing it?

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4. How do we encourage people to innovate, and how do

we reward them when the company benefits from their

innovations?

We’ll return to the theme of putting process around innova-

tion in following chapters. Right now, I would like to share

another story that Barbra told me during our conversation.

Innovation under Pressure

In 2008, Toyota Motor Corporation passed General Motors to

become the world’s Number 1 carmaker. It was an amazing

victory for Toyota, and it vindicated the company’s long-

standing commitment to technical excellence and continuous

improvement.

But things went downhill quickly. Global sales plunged,

and the company recorded the largest losses in its history.

Toyota returned to profitability by the end of 2009, only to

face another crisis: a series of recalls that damaged the brand’s

reputation. Toyota became the focus of government investi-

gations and court actions. James E. Lentz, president and chief

operating officer of Toyota Motor Sales (TMS) USA, was called

to testify before Congress.

With the company’s reputation and financial health at

stake, it became imperative for Toyota to provide accurate in-

formation that would set the record straight and counter the

groundswell of negative sentiment. But finding and surfacing

information in a timely manner was not an easy task. The in-

formation wasn’t stored in one central repository; it was in

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different systems in various parts of the world. Much of the

information was actually unstructured data, which meant that

it would be difficult to analyze.

Barbra realized that the company would have to act

quickly and decisively to get ahead of the mounting criticism.

Here’s the story in her words:

It was real obvious to me that we didn’t have information that

was timely enough to be effective. When you wade into the

world of data, you’re dealing with data warehouses, data

marts, complex analytics—all of this very complicated and

cryptic stuff that only a handful of people know how to use.

In the midst of the most challenging demands of this crisis,

I took the risk of acquiring a database tool from Endeca that

would allow us to locate and analyze both structured and

unstructured data regarding the claims being made about

our products and very quickly gain new insights that were

impossible before. After we had the ability to see the data, we

could be more proactive and more confident. It was a huge

boost for us.

The new data software also demonstrated that IT could

innovate successfully, even under the most intense pressure.

But the story doesn’t end there. The system has been formalized

and is now used to analyze complex data from various sources,

including customer call centers and warranty databases.

The nice thing about this software is that it slices and crawls

across any kind of data we think might be possibly relevant.

We’ve created templates for examining complex data from in-

ternal and external source.We’ve given our quality teams a

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better structure for looking at data. You don’t need elaborate

syntax queries and that sort of stuff. You don’t need to be a

computer programmer to look at the data and run analytics.

Now we can look at data and ask ourselves, ‘‘Okay, how do

we act on this data?’’ Not only have we reduced the time it

takes to get information, we’ve changed the way we think

about data. That’s a big change.

One of the most remarkable lessons from this story is that

CIOs really can change the business for the better. It takes

intelligence, leadership, and courage—but it can be done.

Barbra frames it this way:

In a crisis or in a competitive situation, you’ve got to be able to

do those types of things. When you’re the CIO, you’ve got to

step up and be innovative. If you can’t—if all you can do is

worry about your metrics and your servers and delivering

your projects on time—you will be disintermediated. The busi-

ness will go out and use a credit card to buy the IT services it

needs, and they’ll only call you when there’s a problem.

The Cloud on Wheels

I didn’t want to leave Barbra without revisiting the topic of

cloud computing and Toyota’s new venture with Salesforce.

com. When I asked her for more details of the project, she

agreed to speak only in general terms:

Suffice it to say that we’re placing a big bet on these technolo-

gies. We’re looking at the car as an extension of the consum-

er’s lifestyle, which involves mobile and social computing. This

is the beginning of a complete integration of consumers and

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their vehicles, at multiple levels. Social media is just one aspect

of it. The younger generation sees cars very differently. Cars

are more than just transportation. In Japan, people also use

their cars to generate electric power for their homes. We’re

heading toward cars that are much more intelligent, much

more efficient, and much more integrated with our lifestyles.

Ten years ago, we didn’t have the technology to take this vi-

sion and run with it. Now we have the technology, and we also

have relationships with vendors and suppliers who share the

vision and who understand that we’re all innovating together.

Campaigning in the Cloud

We visited briefly with Tom Peck in Part I of this book. Tom is

the CIO of Levi Strauss, a company that has been a leader in

innovation for more than 150 years. I asked him to talk in

greater detail about the company’s cloud-based initiatives,

and here’s what he told me:

First, let’s align on the definition—cloud computing is a de-

ployment model for IT solutions accessed over the Internet.

This model is in contrast to traditional IT deployments using

on-premise solutions managed in-house. Cloud computing

differs from earlier models of managed services as the cloud

infrastructure scales up and down as your workload expands

and contracts, and you typically only pay for what you use.

However, cloud computing is increasingly used in the broader

sense to refer to any type of managed IT service which enables

faster deployment while minimizing upfront costs.

We have been using SaaS or hosted solutions for many

years. What is new to us is PaaS, IaaS, and leveraging the

cloud for pay-as-you-go, on-demand scalability. In the past

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year we have heavily leveraged the cloud for our online sites

including marketing and promotions, consumer games and

give aways, external blogs and more—for anything where we

expect significant increases in short-term volume where we

lack the scale and/or capabilities internally.

Just as one example, we used the cloud for our Dockers1 Su-

per Bowl campaign. To reinvigorate the khaki brand, we

launched the Dockers1 ‘‘Wear the Pants’’ marketing campaign

in 2010. The NFL1 Super Bowl marketing campaign served as

the traditional broadcast media platform, driving un-

precedented levels of online traffic through an integrated Web,

social, and mobile solution using cloud technology and CRM.

Challenges: It was actually so successful that even the cloud

didn’t scale fast and big enough. In a cloud, you need to be

careful that you don’t limit the scale to what you pay for.

Working with multiple partners across an ecosystem in both

testing/prep as well as when problems occur was also a chal-

lenge. The end-state technology solution involved 13 vendors

and agencies working across seven different Levi Strauss

teams ranging from marketing through IT. Where is the smok-

ing gun when something goes wrong?

Result: It was a huge consumer success that we could not

have done in-house. A few highlights: 4,000 page views per

second on the Web and 200 hits per second on mobile devices;

unpre cedented sustained levels of traffic to dockers.com; we

were the number 1 and number 2 most searched item on Goo-

gle during and after the game; it received 4.2 out of 5 stars on

YouTube; Nielsen BuzzMetrics reporting that in comparison to

other Super Bowl advertisers, Dockers1 had the biggest surge

in Facebook1 fans and Twitter1 followers; and much more.

We’ve also tested our ERP in an appliance-based cloud

offering. Challenges: getting the software partner to ‘‘certify’’

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that it will work in the cloud and dealing with multiple ven-

dors in the offering. Result: We proved out the capability but

now we’re waiting for that ‘‘life event’’ (i.e., server refresh cy-

cle, new project, etc.) to spur the purchase.

Additionally, we have put some of our test and development

environments in virtualized, cloud environments. We are in

the process of putting e-mail in the cloud. Challenges: It wasn’t

plug-n-play as we were sold. Result: Painfully worked through

it but now going live.

As discussed earlier, the consumerization of IT is creating a

value gap that could disrupt traditional IT service providers.

Cloud computing is a reinforcing trend. IT solutions lagging

behind user requirements force users to take matters into their

own hands, leveraging consumer technologies and the Inter-

net. Doing so will reduce users’ dependence on traditional

technology sources. Don’t fight change. Don’t fight the cloud.

Figure out how to embrace it.

‘‘Don’t fight change. Don’t fight the cloud. Figure outhow to embrace it.’’

I also asked Tom to talk about the factors that influenced

the decision to choose a cloud-based service, and what kind

of benefits he expected to realize from the cloud. I found his

response candid and illuminating:

As far as the merits that influence our decision to choose a

cloud-based service, I want speed of deployment, the ability to

surge or scale on demand and the ability to rapidly build and

change components such as test environments for software.

It’s also great for when I lack the internal expertise. I must

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admit that I am still a slight cynic in regards to the cloud.

While there are many merits, there are an equal number of

challenges. Until I can get my ERP in the cloud, my business

intelligence (BI) in the cloud, help close an acquisition faster

via the cloud, and help the business open new stores or enter

new markets, we can’t just assume the cloud will solve all

our problems.

A business executive once tore out a newspaper clipping

about how the ‘‘cloud’’ will reduce costs, speed implementa-

tion, and allow him to reduce his IT staff and costs. I had to

explain to him that there is a lot of truth to that; however, it’s

not a blanket assumption. In this case, we had to separate out

sales and marketing hype from the practical reality that not

everything is in the cloud. At least not yet, anyway.

I also asked Tom to describe how technology has changed

the way Levi Strauss responds to the market:

There have been many changes, but perhaps the most impact-

ful is social shopping. Last year Levi’s1 and Facebook1 broke

new ground as we were the first retail company to integrate

Facebook’s1 social plug-in ‘‘like’’ button with our Levi’s1

e-commerce site. In addition, we launched the Levi’s1 Friends

Store, the first social online shopping experience. Using Face-

book’s 1 Graph APIs, we built an entire social commerce expe-

rience as an extension of our e-Commerce site. We created a

new customized social shopping experience that has changed

the way people shop online—and made buying jeans online

more fun.

We took product reviews one step further by giving people the

opportunity to see what their friends ‘‘like’’ and what products

their friends are buying. This allows our passionate ambassa-

dors to find and share information about their favorite Levi’s1

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products. Upon launch, we saw significant increases in traffic

coming to levi.com from our Facebook1 pa ge.

Our number of Levi’s1 Facebook1 fans has increased from

180,000 to over 4 million in less than a year. And we use our

Levi’s1 brand leveraged Facebook1 to amplify other events

such as concerts and promotions. Our partnership with Face-

book1 continues as we leverage the success of this initiative to

drive continued investments in social media.

‘‘Newer technologies have the risk of making CIOsobsolete if they don’t understand how to harness thepower of them.’’

I also posed this very general question to Tom: How would

you describe the impact of newer technologies (such as

cloud, mobile, and social computing) on the role of the CIO

in a modern organization? Can you cite some specific exam-

ples of a newer technology that has had an impact on your

organization?

As stated earlier, the role of today’s CIO is as much about stay-

ing apprised of and leveraging consumer technologies as it is

about building and buying enterprise applications. Newer

technologies have the risk of making CIOs obsolete if they

don’t understand how to harness the power of them. End users

see consumer applications that allow them to put music and

photos in the cloud for collaborative sharing on demand. Why

can’t those same consumers, acting now as employees, see our

company’s product catalogs digitally on demand while on

sales calls? We must stay apprised and informed.

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Part III

Building Value

‘‘Cloud computing is not the savior of IT. It is nothing but

a way to deploy your enterprise architecture in a way

that has the potential to be more productive and cost

effective. In essence, it is a tool, not a way of life.’’

—David S. Linthicum

Cloud Computing and SOA Convergence

in Your Enterprise

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Chapter 9

Pushing the Envelope

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Where do we enter the cloud? What’s the best way for my

company to get started? How do I decide which service

to move into the cloud first?

If you had posed these questions to a roomful of CIOs two

years ago, most of them would have recommended starting

with corporate e-mail. If you ask the same questions today,

you are likely to hear a range of answers. And the answers

would be more nuanced. Many of the answers would start

with these words: It depends . . .

It depends on the size of your company. It depends on the

level of regulation in your industry. It depends on the needs

of the market. It depends on whether you manufacture prod-

ucts or provide services. It depends on whether your com-

pany is privately owned or publicly owned.

Obviously, there are lots of variables. But as I interviewed

more CIOs, some certainties arose. Every CIO said they would

make sure there was a strong business case for moving a

service or capability into the cloud. Nobody said they would

move into the cloud just for the sake of being in the cloud.

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So I found a sense of unanimity around the idea that you

have to make the business case for moving into the cloud. I

remember thinking, that’s a good sign. But I remember notic-

ing that only a handful of CIOs had fleshed out a real process

for making decisions about the cloud.

‘‘We didn’t focus on the vocabulary of the cloud. Wefocused instead on using the cloud to give us the flexi-bility and agility to respond to changes facing thebusiness.’’

That’s why I was especially glad to interview Steve Phill-

pott, the CIO of Amylin Pharmaceuticals. Steve is a graduate

of the U.S. Naval Academy, and he spent several years as a

naval aviator, flying jets from aircraft carriers. Like pilots

everywhere, Steve is extremely careful. But once he’s deter-

mined the risks and figured out the best course of action, he

moves quickly and decisively. He can ‘‘push the envelope’’

when necessary, but only because he knows where the edge

of the envelope is. Here is Steve’s account of his company’s

‘‘journey’’ into the cloud:

We’ve been on this journey for quite some time. We saw the

cloud coming in 2008. At that time, lots of people were getting

stuck around cloud terminology. They said, ‘‘What does all of

this really mean?’’ And then, in late 2010 and early 2011,

they said, ‘‘Okay, we get the concept, but where do we start?’’

We took a completely different approach. We didn’t focus

on the vocabulary of the cloud. We focused instead on using

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the cloud to give us the flexibility and agility to respond to

changes facing the business.

I think it’s illuminating that Steve focuses first on the needs

of the business. If there’s a ‘‘secret formula’’ for successful

cloud deployments, that’s it: Keep your eyes on what the

business needs.

Steve’s approach to developing a cloud strategy was influ-

enced by The New Age of Innovation: Driving Co-Created

Value through Global Networks by C. K. Prahalad and M. S.

Krishnan. In the book, the authors present two simple state-

ments to summarize their worldview:

N ¼ 1

R ¼ G

The first statement, N ¼ 1, refers to the concept of the cus-

tomer (a segment of one) and the business collaborating to

produce products, services, and experiences that benefit both

the customer and the business. The concept builds on the

ideas of mass customization and one-to-one marketing, and

envisions a radically new relationship between the customer

and the business.

The second statement, R ¼ G, is easier to understand. It

simply means that resources are global. The implications of

this apparently simple statement are profound, and they are

absolutely critical to the formation of a practical cloud

strategy. R ¼ G implies that no company can possibly own all

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the resources required to respond meaningfully and success-

fully to the needs of its customers.

If you accept R ¼ G as true, then the cloud makes a lot of

sense from a business perspective. Since it’s impossible for

any company to possess all the resources it needs to satisfy

its customers, companies must have practical strategies

for reaching beyond their traditional boundaries to obtain the

resources they need to stay in business. Clearly, the cloud

represents one way for companies to reach outside them-

selves for resources that would be impractical or impossible

for them to own or acquire.

And that’s the reason you need a cloud strategy—not

because the cloud is cool technology, but because the

business needs it to remain competitive in a global economy.

Several years ago, you could have argued that all of this is

merely theory. It would be difficult to make that argument

today. The modern economy isn’t just global—it’s consumer-

driven. Consumerization is everywhere, and it’s one of the

factors driving newer technologies such as the cloud.

Steve knew in his gut that the cloud would be part of the

solution for dealing with the realities of R ¼ G. But he needed

a robust and repeatable process for figuring out which ser-

vices and capabilities to move into the cloud. So here is what

Steve did:

Back in 2008, we went through our entire IT budget and

rebuilt it as a list of services. We didn’t say, ‘‘This is how much

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we spend on hardware, software, maintenance, and staff.’’

Instead we said, ‘‘This is how much we spend providing each

service.’’ We had a list of 80 to 100 services that we provided,

and that became our IT budget.

Then I ranked the services in terms of cost, with the most

expensive on top. Then I could immediately see which services

were costing the most. Some of the more expensive services had

to stay in-house for competitive or regulatory reasons. Not every-

thing is an appropriate use case for the cloud delivery model.

But in some cases, we had expensive services that weren’t

providing a competitive advantage and weren’t subject to reg-

ulation. Those became the first candidates for outsourcing or

moving to the cloud.

Rebuilding the IT budget and calculating the real cost of

the services IT provided to the business was not an easy task.

It required months of hard work. But Steve knew that it had to

be done. ‘‘Now I can do an apples-to-apples comparison

between what we’re spending to provide a service and what

it would cost if we outsourced it or used a cloud/software-as-

a-service (SaaS) provider,’’ says Steve.

‘‘But in some cases, we had expensive services thatweren’t providing a competitive advantage andweren’t subject to regulation. Those became the firstcandidates for outsourcing or moving to the cloud.’’

There were other advantages to Steve’s approach. The new

‘‘cost-by-services’’ budget model also creates opportunities to

break down the invisible silos that tend to emerge within IT

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departments as roles become more specialized. Emphasizing

the cost of services over the cost of applications makes it eas-

ier to get people focused on what’s important. Here is Steve’s

take on the danger of letting the silos remain standing:

In IT, we often get too focused on the application. Someone

might say, for instance, ‘‘I’m a Siebel person’’ because that’s

the application they know. But when you look at IT from a

cost-by-services perspective, you can say, ‘‘No, you are not a

Siebel person, you are a person who understands customer re-

lationship data and customer relationship management sys-

tems.’’ So the focus is no longer on the application, the focus is

on the skill set you need to provide the service.

As we all know, silos can form in any department, and they

often create a sense of inertia that is hard to overcome. When

silos are removed, departments usually become more effi-

cient and more open to innovation.

One of the innovations Steve introduced was a cloud solu-

tion for the company’s human resources information system

(HRIS). Here’s the story in Steve’s own words:

We had an on-premise HRIS that had taken four years and

several million to build. After making that kind of invest-

ment, there was naturally some resistance to moving to an-

other system. But we made the case for going with a cloud-

based solution from Workday, and it’s making a huge differ-

ence. The project was deployed in months, not years. I’ve

done two major upgrades of the system in the past six months

with zero capital spend. Most important, it frees up time and

resources so we can focus on bringing innovation to the

business.

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I like that story because it illustrates the value of bringing

a practical mind-set to the cloud. It made sense to

‘‘outsource’’ the HRIS to the cloud, so that’s what the

company did. The decision was based on a careful ‘‘apples-

to-apples’’ analysis of the costs and functionality. In another

situation, when Steve’s team agreed that it was no longer

practical to maintain an on-premise data center, they chose

a different route.

After considering several alternatives, the team decided

to migrate the company’s data center applications to a

much larger data center owned by a specialized provider

in Phoenix. Steve lightheartedly refers to the migration

project as ‘‘data center as a service,’’ but it’s not a cloud

solution, and technically, it’s not even outsourcing. Steve

explains:

Basically, we have a dedicated area within a huge data center

that’s the size of seven football fields. We still own the appli-

cations, we own the racks, and we own the equipment. They

own the building. They make sure the network capacity is

there. They provide air conditioning and cooling. Our power

savings alone make it worth the effort. It fit our R ¼ G strategy,

as this is their core competency. They are continually focused

on efficiency and can manage a data center much better than

I would ever be able to.

‘‘Some people are still struggling with the question ofwhere to get started. I tell them that the opportunitycost of procrastination just continues to climb.’’

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This is an incredibly creative approach to a common

problem. For most companies, the data centers provide little

competitive advantage. So they might seem like perfect

candidates for outsourcing or migrating to the cloud. But if

you’re in regulated industries like pharma, health care,

or financial services, your options are restricted. So you

have to be creative. I’ll let Steve have the last words on

this subject:

One size doesn’t fit all. We have to be flexible enough to in-

novate, and we can’t get trapped in one box. We want a

very, very broad range of capabilities because we don’t

know exactly what the business is going to ask from us in

the future. What we do know is that resources will transcend

the traditional boundaries of the corporation. What we

need isn’t necessarily going to be found within our own

four walls.

The cloud isn’t the answer to everything. But there will defi-

nitely be opportunities to leverage the cloud delivery model,

and part of the job is finding those opportunities.

Some people are still struggling with the question of where to

get started. I tell them that the opportunity cost of procrastina-

tion just continues to climb.

Two Sides of the Same Coin

My friend John Hill, the former Siemens CTO, says it’s impor-

tant to remember that every cloud implementation contains

two essential elements. One element is the technology and

the other element is the business model. These two elements

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are complementary and fundamental. You can’t have one

without the other. They are two sides of the same coin.

Let’s look at the business side first. It should be provisioned

through some kind of self-service portal so consumers can

access it easily and usage can be measured. It should be on

demand and easily activated. It should be a service, not a

capital product. It should be ‘‘pay by the drink’’ so you can

stop buying when you’ve had enough.

Provisioning should be policy-driven, highly automated,

and immediate. If you have to wait a week, it’s not the cloud.

If it requires a long-term contract, it’s not the cloud.

On the technology side, it should be accessible through

standard Internet protocols—if you need to install software,

it’s not a cloud service. It should be dynamically scalable and

elastic, which means that when demand goes up, consump-

tion rises along with it.

‘‘The cloud is technology married to a businessmodel.’’

It doesn’t have to be virtual, but it is often enabled by virtu-

alization. As mentioned, provisioning must be immediate and

highly automated—ideally through a self-service portal. If it’s

the cloud, it probably will be multitenant, meaning that multi-

ple consumers will use it at the same time.

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‘‘The cloud is technology married to a business model,’’

says John. ‘‘If you don’t have that marriage of technology and

business, then you don’t have a cloud. Vendors who are just

selling hardware are not selling cloud. Vendors who are just

selling software are not selling cloud.’’

Of course, we’re speaking in generalities here. There are

no absolutes at this stage of the game. The cloud—as a tech-

nology and as a business model—is still young, and the rules

have yet to be written. We’re all pioneers, and we’re all likely

to make a few wrong turns. We might even stumble, but that’s

why we want to step forward deliberately. It’s okay to be

cautious, as long as our caution doesn’t prevent us from

taking action.

And of course, it all depends on your perspective. Follow-

ing is a quick table sorting out several key differences

between the technology perspective and the business per-

spective on cloud computing:

Technology Business

Rapid access through standard

Internet protocols

Self-service

Automation orchestration Pay by the drink

Dynamically scalable/Elastic Operating expense (OPEX), not

capital expense (CAPEX)

Multi-tenant Immediate provisioning

Anywhere, everywhere, all the time

availability

Easy on/off

Policy-driven

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Now that we’ve defined the cloud as a combination of tech-

nology and business, let’s talk about the value it offers. IBM

recently published a list of cloud benefits:

� Driving business innovation with a large number of

new applications developed with newly affordable cloud

development environments.

� Increasing business responsiveness.

� Lower total cost of ownership and improving asset

utilization.

� Providing an open and elastic IT environment.

� Optimizing IT investments.

� Enabling real-time data streams and information

sharing.

� Providing globally available resources.

The list is by no means exhaustive, but it serves as a good

starting point for looking at the cloud as a value driver. Earlier

in the book, we’ve seen examples of CIOs using the cloud to

enable innovation and support business growth. And I’ve

been hammering at the idea that modern CIOs should focus

more on top-line revenue growth and worry less about striv-

ing relentlessly for greater efficiency. That being said, the

cloud also offers some serious opportunities for reducing IT

operating and capital costs. Because of its very nature, the

cloud will make it easier for many people to use available

IT resources, and as we all know, increased utilization

decreases IT costs.

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Because the cloud enables rapid provisioning on a pay-by-

the-drink basis, IT should be able to reduce the cost of capital

investment. Imagine not having to build systems to handle

peak usage—that’s the promise of cloud computing.

When IBM Research compared the costs of application test-

ing services in a private cloud versus a traditional testing envi-

ronment, it saw hardware savings of 65 percent (from

reduced infrastructure and improved hardware utilization);

software savings of 27 percent (from lower licensing costs re-

sulting from improved utilization); system administration sav-

ings of 45 percent (from lower administration and operating

costs); and provisioning savings of 76 percent (from lower la-

bor costs in service request management).

These are impressive numbers, and they make a pretty good

case for including a cloud option as a matter of routine when

considering any new or additional services or capabilities.

A Multiplicity of Clouds

When I was learning how to sail, I became aware of just how

many different types of clouds there are in the sky—stratus, cu-

mulus, cumulonimbus, cirrus, lenticular, cirrocumulus stratifor-

mis, and dozens more. So I wasn’t totally surprised to discover

that there are lots of different kinds of computing clouds. Let’s

take a look at the various types and nomenclatures you will

find when exploring the universe of cloud computing.

There are two general ways to look at the cloud, and it’s

important to understand the difference between them. We

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can look at the cloud from the perspective of service, and we

can look at the cloud from the perspective of deployment.

Se r v i c e

Let’s begin with service. The three cloud service models that

you are most likely familiar with are:

1. Software-as-a-service (SaaS).

2. Platform-as-a-service (PaaS).

3. Infrastructure-as-a-service (IaaS).

Here are extremely brief and very basic descriptions of each:

� SaaS enables you to ‘‘rent’’ finished applications that are

running on a service provider’s infrastructure. Providers

include Google, Salesforce.com, Workday, Right Now

Technologies, and many others.

� PaaS enables you to use a service provider’s platform to

develop and test your own applications and to deploy

them over the Internet. Providers include Amazon Web

Services (EC2), VMForce, NetSuite, Microsoft Azure,

Clickability, LongJump, and others.

� IaaS enables you to ‘‘rent’’ a broader range of basic IT re-

sources (e.g., storage, network, bandwidth, memory).

Providers include Amazon Web Services, Rackspace,

Flexiscale, Joyent, and others.

But as cloud expert David Linthicum notes, it doesn’t end

there. In addition to the ‘‘top three’’ service models, there are

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also storage-as-a-service, database-as-a-service, information-

as-a-service, process-as-a-service, integration-as-a-service,

security-as-a-service, governance-as-a-service, and testing-

as-a-service.

As you can see from their names, each of these types of

service offers specific benefits. For more detailed descriptions

of these service components, I recommend reading David’s

excellent book, Cloud Computing and SOA Convergence in

Your Enterprise: A Step-by-Step Guide.

Dep l o ymen t

From the deployment perspective, there are four broad

categories:

1. Public cloud.

2. Private cloud.

3. Hybrid cloud.

4. Community cloud.

The public cloud is the deployment model that tends to

garner the most publicity. It is also the model that, quite

frankly, you are least likely to use if you are responsible for

developing an enterprise cloud strategy. The main problem

with the public cloud is data security, and until that problem

is solved, business users will regard it with understandable

skepticism. That being said, it requires the least amount of in-

vestment—which means that it is probably the best place to

being testing and exploring the cloud.

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Large organizations are likely to see the private cloud

model as the most logical choice. Security is less likely to

be a problem in a private cloud for the simple reason

that private clouds are—private. You own it and you

decide who gets to use it. The other nice thing about

the private cloud model is that large corporations already

have much of the virtualization infrastructure required to

make it work.

The advantage of the hybrid model is that it provides the

best of both worlds—the security of the private cloud and

the low cost of the public cloud. Large companies with

highly variable demands for IT services can use the hybrid

model to ensure that needs are met during peak periods. In

a sense, the hybrid model leverages the public cloud as a

‘‘spillover’’ system.

The community cloud model takes into account that cer-

tain types of cloud computing are more likely to be used

by specific industry verticals, and that it makes sense for

companies within those verticals (such as financial services

or health care) to use clouds that have been designed

and architected to meet their needs more closely than

generic clouds.

Following are three diagrams based on IBM’s vision of

a practical cloud ecosystem. These are high-level diagrams,

not intended to serve as detailed blueprints for formal cloud

architectures. They are useful references, however, and

they can certainly help you get the cloud conversation

started.

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CloudService

Consumer

Cloud ServiceIntegration

Tools

ConsumerIn-house IT

ServiceCreation Tools

CloudServiceCreator

Cloud Service Provider

Cloud Services Common CloudManagement

Platform (CCMP)

Software-as-a-Service

Platform-as-a-Service

Infrastructure as a Service

Business-Process-as-a-Service

PartnerCapabilities

OperationalSupport Services(OSS)

BusinessSupport Services

(BSS)

Infrastructure

Security, Resiliency, and Performance

Governance

IBM Diagram of Cloud Reference ArchitectureSource: IBM

Security

SecurityPolicy

AccessManagement

Audit andComplianceManagement

Commandand Control

Software,System, and

Service Assurance

Identity Life-cycleManagement

Data policyEnforcement

SecurityEntitlement

Threat andVulnerability

Configuration forResiliency

Resiliency PolicyManagement

DataResiliency

ResiliencyComplianceAssessment

Availability andContinuity

Management

ResiliencyMonitoring/Analysis

Resiliency

Components of a Cloud Security and Resiliency ArchitectureSource: IBM

Turn of the Tide

I studied hundreds of surveys, reports, and white papers over

the course of writing this book. One really stood out from the

pack, and I want to share its findings with you.

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Common Cloud Management Platform

Service Delivery Catalog

Operational Support Services (OSS)

Service Automation Management

IT Service Level

Management

Incident and Problem

ManagementProvisioning

ImageLife-cycle

Management

Change and Configuration Management

Service Request

Management

IT Asset and License

Management

Monitoring and Event

Management

Capacity and Performance Management

Platform and Virtualization Management

Order Management

Service Request

Management

Contracts and Agreement

Management

Service Offering

Management

ServiceOfferingCatalog

Customer Account

Management

PricingSubscription Management

Entitlement Management

Accounts Receivable

Accounts Payable

Clearing and Settlement

BillingRatingMetering

Business Support Services (BSS)

Service C

onsumer P

ortal and AP

I

Service D

evelopment P

ortal and AP

I

Service Provider Portal and API

Components of a Common Cloud Management PlatformSource: IBM

Published in June 2011 by Avanade, its title is ‘‘Global Sur-

vey: Has Cloud Computing Matured?’’ Its content is based on

a March 2011 survey of 573 C-level executives, business unit

leaders, and IT decision makers in 18 countries.

Avanade, as many of you know, was launched as a joint

venture in 2000 by Accenture and Microsoft. It provides tech-

nology services across multiple sectors including telecommu-

nications, financial services, public sector, multinational

retailing, manufacturing, and entertainment.

The report is the third in an annual series, and it reveals

some interesting trends in the way technology executives

look at the cloud. Here are some nuggets from the report:

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‘‘According to the survey, 74 percent of enterprisesare using some form of cloud services. This representsa 25 percent growth since Avanade’s September 2009survey.’’

Looking to the year ahead, 55 percent of companies report

their IT budgets will grow, and for the first time in several

years, companies are able to shift from a ‘‘do more with less’’

to a ‘‘do more with more’’ IT operation. Companies are adopt-

ing new technologies to deliver new services and in some

cases, to cut ongoing costs with more efficient systems.

When asked about their primary IT focus areas in the next

12 months, cloud computing, security and IT consolidation

topped the charts. Of the 573 business leaders in 18 countries,

60 percent report cloud computing, 58 percent report security,

and 31 percent report IT consolidation as the three highest

priorities.

While 60 percent of companies worldwide said cloud com-

puting is a top IT priority for the next year, the sentiment

is even higher in the C-suite with three in four (75 percent)

C-level executives reporting cloud computing as top of mind.

According to the survey, 74 percent of enterprises are using

some form of cloud services. This represents a 25 percent

growth since Avanade’s September 2009 survey. Further, the

gap between cloud adopters and those who have no plans to

implement cloud computing has shrunk dramatically—

54 percent since 2009. Of the organizations that have yet to

implement cloud, three-quarters say it’s on the horizon.

. . . In terms of their overall IT budget, 74 percent report

they have allocated up to 30 percent to cloud computing

annually. For 10 percent of companies, this means spending

$2 million or more on cloud computing each year. Companies

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are investing in their employees too. In fact, most companies

report their IT spend on cloud services is between $100 and

$499 per user (38 percent).

This year (2011), additional investments in cloud services

were matched by significant spending on security and train-

ing for new cloud deployments.

‘‘ . . . In terms of their overall IT budget, 74 percentreport they have allocated up to 30 percent to cloudcomputing annually. For 10 percent of companies, thismeans spending $2 million or more on cloud comput-ing each year.’’

Tyson Hartman is Avanade’s chief technology officer. He’s

responsible for Avanade’s technology vision, solutions, and

R&D investments. As CTO, he leads the incubation and

engineering teams that deliver differentiated solutions across

the complete enterprise IT life cycle. I spoke with Tyson

about the survey and its implications. Here’s a summary of his

observations:

There’s been a significant turn of the tide. We’re definitely past

the ‘‘what and if’’ phase and getting into the ‘‘where and

when’’ phase. That’s especially true of SaaS, where people can

perceive the value of moving e-mail, collaboration, and CRM

services into the cloud. With SaaS, you get a predictable cost

advantage. You know exactly how much per seat your tools

are costing you. That’s an attractive combination—speed to

market and predictable costs.

I think the tipping point for IaaS will be a little different. The

buyers are different—business people gravitate to SaaS and

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tech people gravitate to IaaS. With SaaS, you’re buying a ser-

vice that is very predictable, and you take on very little opera-

tional liability. With IaaS, you’re retaining a certain amount

of operational control, which means you’ve got more visibility,

but also more liability.

PaaS offers the most potential, ‘‘because basically it’s a

blank sheet of paper,’’ says Tyson. But that potential is also

what’s holding people back from getting more involved with

PaaS. Here’s more of what Tyson told me:

Compared to SaaS and IaaS, PaaS is less well defined, and

I think it will take people longer to appreciate the opportunities

it offers. It could be a very interesting solution for Web-

intensive functions that are high cost and less predictable,

such as e-commerce, where most of the installed base is using

custom software.

But it will take a while for PaaS to mature and get to the

point where it’s providing the kind of features that an e-

commerce customer would need, and it will take time for

the market to understand what PaaS can offer.

If you had a pie chart showing the relative proportions of

SaaS, PaaS, and IaaS customers worldwide, all I can say is

that those proportions will be changing very quickly. This is a

fast-moving market.

The research also shows that a strong preference is emerg-

ing for private cloud deployments, especially in areas of com-

petitive differentiation. Here’s what the report says:

Previously, companies relied on third-party public cloud pro-

viders for the majority of their cloud infrastructure. Yet today,

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nearly half of all companies (43 percent) report they utilize

private clouds. Further, another 34 percent say they will begin

to do so in the next 12 months.

Overall, 63 percent say they are ready for private cloud and

the majority says it plays a role in their cloud strategy. In the

C-suite, perceptions are higher with more than 70 percent say-

ing their company is ready for private clouds. In preparation

for this, companies are investing in everything from security

(48 percent) to their networks (47 percent) and staff

(35 percent).

While opinions vary, most see private clouds as more secure

and easier to control.

I think that many of us had a gut feeling about this, and it’s

great to see the survey numbers supporting our instinctive

sense that many companies will see private clouds as a better

strategic fit than public clouds.

‘‘The mandate to use cloud computing to deliver newproducts and services to customers is coming from theC-suite. More than one in five C-level executivesbelieve cloud computing will increase revenues.’’

The report also supports a theme that has been running

through this book, namely, the idea that the cloud has great

potential to help companies improve their top-line perform-

ance. Again, quoting from the report:

Companies are moving beyond internal employee-facing

cloud services to use them with external customers.

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Further, aggressive adopters report top-line growth as a

driver for cloud deployments. The mandate to use cloud com-

puting to deliver new products and services to customers is

coming from the C-suite. More than one in five C-level execu-

tives believe cloud computing will increase revenues.

Experience suggests that as executives learn more about

the cloud, they will want to review cloud options when

any new technology for generating revenue is under

consideration.

Translating ‘‘Speeds and Feeds’’ into Cash Flow

I decided to conclude this chapter by recounting a recent con-

versation I had with Mike Blake. Mike is the CIO at Hyatt Ho-

tels Corp. Like most CIOs, he’s comfortable talking about the

technology side of his job. But he’s one of a handful of CIOs

who is equally comfortable talking about the financial com-

ponent of his role as a C-level corporate officer.

Unlike many of his peers, Mike has a deep finance back-

ground that affords him a unique perspective on the relation-

ship between IT and the enterprise. Before being named

Hyatt’s CIO, he was the company’s VP of Finance Global

Marketing, Brand Standards, and IT. Prior to joining Hyatt, he

was SVP of Finance at First Data Corp. Before that, he was VP

of Finance at Kaiser Permanente. He’s a CPA and a CMA.

He holds an MBA from the University of Chicago. When he

describes himself as a ‘‘hardcore finance guy,’’ he isn’t

exaggerating!

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I asked him to describe his method for assembling a portfo-

lio of IT services and applications. Here’s a summary of what

he said:

I look at investments through the lens of an ROI calculation in

which the numerator is value and the denominator is cost.

As CIO, my job is increasing value while reducing cost. I look

at everything through that lens, which allows me to focus on

the end result. I think of it as translating ‘‘speeds and feeds’’

into cash flow.

For example, we recently changed our e-mail system. One

of the reasons we switched was that many of our employees

had difficulty using the old e-mail system. As a result, there

were lots of calls to the help desk. Those calls represent costs.

They represent downtime and lost productivity. We factored

the economics of all that into our decision to go with a new

e-mail provider.

In addition to being easier to use, the new cloud-based sys-

tem enables Hyatt to provide e-mail, instant messaging, and

social collaboration apps for 17,000 employees and 40,000

desk-less workers such as bellhops and housekeepers. By

improving connectivity across the enterprise, Hyatt improves

efficiency and productivity. Guests are happier, too, because

their needs are met more quickly.

Mike is continuing Hyatt’s migration into the cloud, a pro-

cess the company began 16 years ago. Migrating into the

cloud is not a simple process—in fact, it’s a lot like finance.

There are plenty of variables that require continuing atten-

tion. For example, Hyatt’s property management system is

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hosted by AT&T. The company’s financial systems are hosted

by Oracle. Reservations and group sales are outsourced to

CSC. NaviSite, a managed cloud services provider owned by

Time Warner Cable, is also part of the mix. That’s a lot of

complexity!

But there’s an upside. Hyatt’s global IT organization is gen-

uinely lean—just forty-three people. And it’s nimble. System

changes can be implemented in hours, instead of days or

weeks. Security is handled by the cloud providers, which

removes a heavy burden from IT’s shoulders. ‘‘AT&T can

afford to spend a lot more on security than we can,’’ says

Mike. ‘‘And that’s fine with me. I get to leverage their invest-

ments in new technology. I don’t have to worry about change

management issues. And as the model matures, the price

comes down.’’

From Mike’s perspective, IT is all about reducing opera-

tional costs across the business. ‘‘That’s what IT does—drives

down cost. The cloud can help you do that, so why not take

advantage of it?’’

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Chapter 10

Entering the Cloud

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Now, hopefully, you have an idea of what the cloud uni-

verse looks like and what it comprises. The next step is

determining which IT services should stay right where they

are, and which IT services should be moved into the cloud.

The best and easiest way to start is by reviewing your in-

ventory of applications—your software portfolio.

‘‘Look first at applications that don’t require a high degree of

state,’’ says John Hill. ‘‘Look for workloads that are highly tran-

sient. Applications that utilize IT resources at a fairly consistent

level should not be considered prime cloud candidates because

it would be cheaper to run them in a hosted environment. Look

for applications with spiky usage patterns and seasonal peaks.’’

John suggests this basic approach:

� Establish an application portfolio strategy.

� Embrace SaaS.

� Accelerate virtualization of applications.

� Adopt application life-cycle management (including

framework selection) processes.

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� Ensure SOA/Web services infrastructure is in place.

� Implement a robust service request portal to provide a

consistent way for users to request cloud and traditional

services.

� Implement a converged infrastructure for network/

server/storage.

� Establish a cross-discipline architecture and engineering

team to guide cloud efforts.

� Pilot and experiment; figure out what works and scale it.

� Focus on creating business value!

David Linthicum outlines this high-level, four-step process

in his book:

1. List candidate platforms (for migration to the cloud).

2. Analyze and test candidate platforms.

3. Select target platforms.

4. Deploy to target platforms.

Steve Phillpott, the CIO at Amylin Pharmaceuticals, used a

three-step process that looks like this:

1. Review portfolio of IT services and their costs.

2. Rationalize and prioritize services against appropriate

cloud use cases.

3. Move IT services into the cloud—when appropriate.

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Let’s drill down into the first two steps. Step 1, for exam-

ple, includes a detailed breakout of IT services. Here’s a

snippet that will give you an idea of the detail in Steve’s

analysis:

IM Services Total Cost of

Individual

Service

Individual %

of Total

Budget

Technology Infrastructure Engineering and Operations

Communications

Directory Services and E-mail

(including LO)

Phones/Phone Sys/Voicemail

Conf Room Equip & Support

Web-Voice-Video Conf

Telecommunications Services

Wired—WAN/LAN and Internet Transport

Wireless Telecomm Services

Remote Access Enablement

InfoSec/Risk Mgmt/DR/SOX

End User Computing

Desktop Computing HW SW Engineering

Personal Printers/Shared Printers/

Copiers

Service Desk and User Support

Service Desk Operations

Executive Support

Event Support (Site Mtgs, ADA)

(continued)

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(Continued)

IM Services Total Cost of

Individual

Service

Individual %

of Total

Budget

Technology Infrastructure Engineering and Operations

Site Support

Enterprise Collaboration Services

LiveLink EDMS

Collab Services SPoint/MOSS and

Content Mgmt

Here is a breakout of criteria used to complete Step 2:

Cost/Benefit

ROI (TCO-Based)

Performance and Architecture Fit

Control/Governance

Data Mgmt, Customization, etc.

Security/Risk Mgmt

Privacy, Compliance, etc.

For Steve, it was critical to develop (and follow) a practical

decision matrix process. As you recall from the story he tells

earlier in the book (see Chapter 9), he and his team had spent

months developing a ‘‘cost-by-services’’ IT budget model that

would enable them to make apples-to-apples comparisons

between the costs of traditional on-premises solutions and

cloud-based services.

They looked for—and found—TCO reductions of 30 to 70

percent. They also factored in the advantages of variable costs

(as opposed to fixed costs), shorter implementation times,

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automatic upgrades (at no incremental cost), and improved

functionality. They also added the value ‘‘recovered’’ by shift-

ing IT resources from low-value tactical activities (such as

maintenance) to higher-value strategic activities (such as

planning and partnering with the business).

I boiled part of Steve’s process down to a checklist:

On-Premises

Solution

Off-Premises Solution

(cloud or other form

of outsourcing)

TFO Higher Lower

Costs based on

demand

No, costs are fixed Yes, costs are variable

Automatic upgrades No (and they’re

expensive)

Yes (and they’re free)

Time to

implementation

Longer, slower Shorter, faster

IT focus Tactical Strategic

The point of all these charts isn’t to create headaches or

accounting nightmares—the point is to illustrate the granularity

of data required to reach the best possible decisions about which

services to move into the cloud. In these kinds of situations,

the last thing you want to do is rely on guesswork or hunches.

You really have to do your homework. As Pat Toole mentioned

earlier, this isn’t rocket science—but it is computer science!

Governance Is Fundamental to Success

We all have a tendency to look at governance as a set of limits

or restrictions, a list of directives all beginning with ‘‘Thou

shalt not . . . ’’ I prefer to look at governance as a framework,

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or as a map. It shows you where borders are. It says, ‘‘Here is

safe ground, here is unsafe ground.’’

My conversation with John Hill reminded me that govern-

ance can be leveraged to increase acceptance and utilization

of new technology. When you have clear governance polic-

ies, people are less afraid to embrace new ideas and new

ways of doing things.

For cloud initiatives, governance is absolutely critical. Since

a key attribute of the cloud is self-service, people need to

know the rules and have a fundamental understanding of the

boundaries. In other words, you need an ultra-clear set of

written policies for using cloud services.

Here is where your role as an executive leader comes into

play again. You will have to designate a team to write a set of

cloud policies. You will have to spell out the policies clearly

and unambiguously. After the team has written its first draft,

you will have to review it carefully to ensure that your policies

aren’t so draconian that they will deter people from using

cloud services.

Remember, the point of having written policies isn’t to pre-

vent people from using cloud services—the reason you create

a set of policies is to give people a sense of safety and secu-

rity. The policies are there to say, in effect, ‘‘As long as you do

this and avoid doing that, nothing bad will happen.’’

Just posting the policies somewhere on your corporate in-

tranet won’t be sufficient. You will have to hold training

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sessions—they can be live sessions, webinars, video confer-

ence calls, and so on. The point is training users to see the

policies as a helpful guide, and not as a burden.

And of course, the policies have to be written into the auto-

mation process. That’s what I meant earlier when we were

talking about ‘‘policy-driven’’ provisioning of cloud services.

Ideally, provisioning of cloud services should be through an

automated self-service portal. It should be easy, immediate,

and measurable. It should also conform to your written

policies.

When you assemble your policy development team, make

sure to include representatives from other areas of the enter-

prise, such as legal, HR, sales, finance—any area where you

anticipate usage of cloud services. The perspectives and opin-

ions of people outside of IT can be extremely useful when

writing an enterprise-wide policy. Including a diverse range

of perspectives in the policy development process is more

than just good management—it will help you avoid problems

down the road.

Due Diligence

We asked several of our sources to list the due diligence ques-

tions every CIO should ask before moving an IT service into

the cloud. We got great responses from everyone we asked,

and we picked the best two to share with you.

We’ll begin with Trae Chancellor, VP of Global Enterprise

Strategy at Salesforce.com. In additi on to providing cl oud

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se rvices, Salesfo rce.com also uses cloud servic es. Trae, wh o

initially joined Salesforce.com as its CIO, recounted the story

of the company’s transformation from traditional IT to a

cloud-based services model. The transformation project be-

gan in 2006 and took about two years to complete. Here is a

summary of what he told me:

When we began our transformation, platform-as-a-service

didn’t exist. We took our IT department and moved it into

R&D. We decided that everything we required from a platform

from an IT perspective would be built natively in the platform

that we were continually developing, which eventually be-

came Force.com. The idea of sandboxes (environments for de-

velopment, testing, and training without compromising data

and applications in the production environment) and open

architecture all came out of that transformation.

For us, a key piece of the process was being able to promote

changes from the sandbox to production. Initially, we had to

do that manually. Now we can do it with a click. I’ve seen

companies set up test environments and then begin integra-

tion with key systems within a couple of weeks and drive inno-

vation. It really comes down to how fast your people can make

the transformation and ensure balance between pace and

governance.

The big lesson that I learned from all of this is that transfor-

mation into the cloud is a people issue—a change manage-

ment issue—and not a technology issue. The technology is

there, it’s available. The issue is speed and pace. How fast can

your people adapt to change and innovation? That’s the issue.

Sometimes I wish that I had taken more psychology classes in

college. Moving into the cloud isn’t about technology—it’s

about leadership. You have to be a leader to help people make

the transformation.

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‘‘The big lesson that I learned from all of this is thattransformation into the cloud is a people issue—a changemanagement issue—and not a technology issue.’’

This is exactly the kind of insight that CIOs need to hear

and internalize: Leadership makes or breaks a transformation

strategy.

Here is Trae’s list of due diligence steps:

1. Confer with your peers; let them tell you what works

and what doesn’t.

2. Make sure that your cloud provider is ready for a long-

term partnership. Make sure that you’re dealing with a

reliable, established provider with a track record of sup-

porting their customers and enabling their success.

3. Always remember the basic value proposition of the

cloud: faster innovation and reduced complexity. Make

sure the provider can deliver on the foundational prom-

ise of cloud technology (i.e., speed, simplicity, agility).

4. Make sure your provider innovates faster than you

can—you don’t want to develop a great new product

and then find out that your cloud provider can’t deliver

the service required to get that product or service to

market.

5. Avoid the possibility of vendor lock-in by choosing pro-

viders whose cloud services are built on open standards

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and open architectures. In the long run, vendor lock-in

will add cost, reduce your agility, and slow your pace of

innovation.

This advice is priceless, and I’m grateful to Trae for sharing

the lessons he learned as a genuine cloud pioneer.

I’m also delighted that Tony Leng agreed to share his list of

essential due diligence questions with us. Tony is a Managing

Director at Diversified Search and heads up the Technology,

CIO and Private Equity practices within the firm. Prior to his

executive search experience, Tony served on the board of three

public companies and was the CEO of a $600 million public

diversified IT company that controlled businesses in software,

communications, services, distribution, integration, defense

technology, and outsourcing. Before that, Tony ran a large

division of a major telco focused on corporate users and had

responsibility for all data services and networking products.

Tony’s list is gleaned from his frequent exposure to CIOs

and begins with three broad areas of consideration, followed

by two sets of due diligence questions, one focused on inter-

nal issues and the other focused on external issues.

Three Broad Concerns

1. Security. For certain industries, security is a big issue.

For example insurance is a regulated industry and they

also handle personal information. Currently I know of

CIOs who are not convinced that there is an acceptably

secure solution outside a private cloud.

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2. Service levels. Many online companies have to be

available 24/7 365 days a year. Again, outside a private

cloud, I have yet to hear of a service provider that can

provide that level of service. Since the cost is also tied to

service levels, pushing for 99.999 uptime can become

very expensive.

3. Cost of the service. The true value of the cloud to one

CIO I know is that his company has high and low usage

levels on a daily basis with a significant difference in the

computing power required at peak times. They also have

seasonal highs and lows with the same profile. Therefore,

a metered cloud is theoretically very attractive to him, but

it is very hard to find a service provider that can mirror

his environment where the cost is less than his current

internal cost. (Note: these arguments do not apply as

much to a pre-production environment.)

Next come the due diligence questions a CIO should ask

after deciding that an external cloud provider is in fact

viable for the organization.

Looking Internally:

1. What are your strengths and what is strategic? For exam-

ple, for most companies a data center is not unique or

strategic, which will make the infrastructure a candidate

for cloud.

2. What is the appetite (culturally) for your organization to

move systems, data, processes, applications into the

cloud?

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3. What data is governed by compliance/regulatory

requirements? Not everything in an IT organization is

subject to regulation.

4. What does your cost structure look like?

5. Can IT become a contributor to the top line if resources

are deployed more effectively?

Looking Externally:

1. How mature is the provider in providing services?

2. What is your exit strategy in case the relationship with

the provider goes south? Think about this before

committing.

3. SLAs are a given . . . but becoming less important. An

SLA with someone you don’t trust is just a source of

strife. You need to decide if and how you can build trust

with your provider.

4. When evaluating a provider, talk to other clients using

the same service at your scale. Industry is generally not

important for this conversation.

5. What are the scale boundaries for the services you are

using? How big can they really go? Not just what they

say . . . you have to validate it.

6. How would you use a multivendor strategy for each

service moving into the cloud? How well do the provid-

ers work together? How much does your architecture

have to change to accommodate this methodology?

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7. Review the provider Disaster Recovery plan. Ask to see

the latest test.

8. How easy is it to extend the solution, can you do it your-

self, or do you have to pay your provider to make

extensions?

9. Does the provider have an app exchange that will let

you add extensions or other solutions easily?

10. Ask to see the release schedule of future releases and

ask how often the releases are done.

11. How often does the provider take the cloud solution

down for maintenance?

12. Who are their implementation partners (if they have

any)?

13. Does the platform scale? Is it really designed to be a

multitenancy app, or is it just a hosted solution called a

cloud service?

14. Understand the difference between infrastructure-as-a-

service (IaaS), platform-as-a-service (PaaS), and soft-

ware-as-a-service (SaaS). They all have a place and are

all different. What is the provider offering?

You have to embrace failure. Embrace chaos whileyou’re at it too. There’s the concept of ‘‘chaosmonkey.’’ It really puts the team in a mode of expect-ing failure and therefore it changes your paradigm andfrees you of historical encumbrances.

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I also asked Tony to weigh in on two general questions about

the cloud and IT leadership. Here are his unedited responses,

in a Q&A format:

Question: Tony, what have your experiences with major

trends similar to the cloud taught you, and what

advice do you have for companies considering

cloud-based services?

Answer:

� If you don’t have a cloud strategy, you’re already behind

the curve. But as an organization crafts its cloud strategy,

it must take into account the impact of executing that

strategy, both internally and externally.

� The CIO should first evaluate the strategic advantage of a

move to cloud-based services. Does it make sense to do

it now?

� Moving to the cloud is not simply moving a service from

an internal provider to an external provider. Most of the

initial challenges involve overcoming organizational

hurdles.

� Cultural change should thus be addressed as one of the

first agenda items and is fundamentally a leadership issue.

� Architectural changes are also important. You can’t just

assume that operating in the cloud works the same as it

did internally. In most cases, it doesn’t.

� Embrace failure. Embrace chaos while you’re at it too.

There’s the concept of ‘‘chaos monkey.” It really puts the

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team in a mode of expecting failure and therefore it

changes your paradigm and frees you of historical

encumbrances. This doesn’t mean you have to fail, but

until the market matures there will be some bumps along

the road.

� A good comparison is the cross over from physical to

virtual environments that have taken place over the past

few years. If you look at the early adopters who took on

virtualization when the software was relatively im-

mature, it is clear they had a number of issues to over-

come. But when the supporting software and processes

matured, it made adoption of virtualization a lot easier

and more pain free. Looking at the adoption of cloud

services, you see a similar trend. The software and pro-

cess are improving and should reach maturity soon.

Companies must look at their own profiles, their ability

to accept risk, and the level of security they require, and

then make a decision as to whether ‘‘the cloud’’ is ready

for them. As one CIO told me, ‘‘Looking at the graph for

cloud adoption we decided it was too early for our

company.’’

� You need to be prepared for updates three times a year.

You often don’t have a choice; you just get the updates.

� Experience skills sets in these new platforms are new,

expensive, and harder to find.

� It will eliminate capital cost, but that capital cost will be

replaced by monthly/yearly operating costs forever. This

could be good or bad depending if you are capital bud-

get constrained or operating budget constrained.

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Q: From your perspective, what are the main leadership

challenges facing CIOs in a rapidly changing business

environment?

Answer:

1. The challenges vary by industry, company size, and age.

For a mature company, with mainframes and large staffs,

the challenge is very different than for a newer, agile,

innovative company. Here are some typical challenges

to overcome.

2. There is FUD (Fear, Uncertainty, and Doubt). There are

many different models that range from avoiding cloud to

jumping in head-first. I think the first challenge is fear of

the unknown. You can’t avoid it because, if you do, the

business will work around CIOs and IT organizations to

get what they need. This is a leadership challenge.

3. The CIO also needs to be able to truly think strategically

and talk business . . . not technology. Many CIOs say

they can do this . . . but it is still a major challenge. The

CIO needs to be driving the process or it will happen

around him/her; yet another leadership challenge.

4. The CIO must get the IT team to embrace cloud. They

may look at it (like outsourcing years back) as a job-

elimination plan for the infrastructure group. It’s not.

Cloud solutions provide a significant opportunity for the

IT organization to become more strategic and business

focused; yet another leadership challenge. And it’s a

great way to move dollars toward revenue-generation

activities that support the top line.

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5. One CIO I know says that his challenges are on two

main fronts, ‘‘more with less’’ and ‘‘time to market.” Hid-

den in these are the challenges of mobile computing,

the cloud, virtualization, big data, and licensing. (You

need to be very aware of the ‘‘gotchas’’ in licensing as

you move to offshoring, working from home, and re-

mote computing.)

From this, it is clear that cloud is one part of a complex array

of strategic challenges and choices facing CIOs, but it is a

vital one, and the right choice can ensure that the CIO is a

tremendous contributor to building business value.

It’s great that Tony could take the time to join the conversa-

tion and provide such helpful responses.

Taking ‘‘No’’ Off the Table

When Clifton (Clif) Triplett confronts a complex IT challenge,

he often reflects on his 10-year career as a U.S. Army officer.

‘‘Saying ‘no’ was not an option,’’ says Clif. ‘‘We were expected

to build systems that could survive being blown up or

infiltrated.’’

‘‘You have to assume the potential for compromise orfailure and design your systems so they’ll still work,even if something goes wrong. That’s life; you justhave to take life as it is dealt and take the challengeshead on.’’

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Today Clif is VP and CIO at Baker Hughes, a global pro-

vider of advanced technology and consulting services to the

oil and gas industry. A graduate of the U.S. Military Academy

at West Point, Clif still finds his Army experience beneficial,

especially when the challenges seem daunting or in-

surmountable. Here are some of the unique insights that Clif

shared with me, in his own words:

In the military, you operate under the assumption that some

resources might be lost or compromised. You have to assume

that your assets will come and go, and that you won’t always

have full control over the operational environment.

That’s why you have to make the best use of all of the avail-

able resources. Let’s say you’re in the field artillery. You have

four guns and the enemy is approaching. Are you only going

to use one gun? How many do you want to hold in reserve?

Three are probably too many.

When I think of cloud computing, I see it from a similar

perspective. You have to assume the potential for compromise

or failure and design your systems so they’ll still work, even if

something goes wrong. That’s life; you just have to take life as

it is dealt and take the challenges head on.

Cloud computing is at our doorstep. Even though a cloud

service could cause problems or because the provider won’t

guarantee 100 percent availability, I will figure out how to

make the best use of the asset as it exists and see what I can do

to improve on it.

Security is another issue that often slows the adoption of

available cloud resources. I asked Clif how he would reply if

someone on his team expressed doubts about security. Here’s

what he said:

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Our cloud security strategy is fairly robust, so I don’t think my

security leader would say we cannot use cloud services be-

cause we do not know how to leverage it safely. But it would

not surprise me to hear him say he’s discovered a new threat

vector that has arisen and concerns him. In that case, I’d

probably ask, ‘‘Which dimension of our defenses bothers you?

Is the problem preventing, detecting, containing, or eradicat-

ing the threat?’’

Very quickly and very methodically, we would get into a

very specific conversation about the problem and the solution.

And of course, it’s important to have a common taxonomy so

we can all understand each other.

I am deeply impressed by the combination of common

sense, leadership skill, and executive ability that Clif brings to

the table. He embodies the ‘‘can-do’’ purposeful spirit that we

often strive to achieve in ourselves. Here’s some great advice

he offered during our conversation:

Essentially, we have to stop asking, ‘‘Can it be done?’’ and start

asking, ‘‘How can it be done?’’ Our team and our suppliers

have accomplished some remarkable things because I’ve asked

them to aim higher. If you play the victim, then maybe all you

can get is 98.5 percent availability guaranteed. But if you

partner with people and provide leadership, you can get 100

percent.

Leadership is the key, says Clif. The problem, he says, is that

many people still cling to the past. They find it difficult to accept

that the world around them is continuously changing and trans-

forming. As a result, they tend to look backward for answers,

instead of forward. Here is Clif’s take on the dichotomy:

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In IT, we used to sit around waiting for orders. We can’t do

that any more. We need to be out there pushing what’s possi-

ble. Yes, the business needs to tell us what it needs to do and

where it wants to go. But we really have to make sure that the

conversation is about capabilities and outcomes, and not

about technical gobbledygook.

I’m constantly pushing my team to go faster than the speed of

business. In the past, IT was always a barrier. Now IT is an ena-

bler. We enable the business to innovate. We want the business

to have the capabilities it needs to innovate—sometimes before

the business even knows that it needs those capabilities!

To me, being the CIO is about continuous improvement. We

never want to move backward. That means pushing people to

move forward, which is a skill in itself. In fact, it’s the secret

sauce—moving people forward.

But you have to know how hard to push. And that means

you have to talk to people, get to know them, and discover their

passion. Passion is the most important thing. Passion is conta-

gious, and it’s the key to success.

‘‘In the past, IT was always a barrier. Now IT is anenabler. We enable the business to innovate.’’

Clif’s ability to motivate people—and to form meaningful

partnerships with them—has led to some incredible successes

with suppliers such as IBM and Microsoft. ‘‘I try to create win-

win situations, where we all focus on the mission,’’ he says.

‘‘We play as a team and we all share our ideas. We know we

have to achieve results because the team has to establish a

track record of delivering value consistently.’’

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‘‘To me, being the CIO is about continuous improve-ment. We never want to move backward. That meanspushing people to move forward, which is a skill initself. In fact, it’s the secret sauce—moving peopleforward.’’

Clif sometimes refers to the ‘‘3Cs’’ of successful leadership

as communications, candy, and cadence:

1. Communications. Be engaged, reflect priorities, dem-

onstrate understanding, discuss priorities, offer choices,

review trade-offs, and communicate status updates,

issues, and wins.

2. Candy. Do not underestimate the value perceived from

unexpected, easy, low-cost activities.

3. Cadence. Establish a reputation for predictable and re-

liable delivery of value.

He also has a great acronym from his Army career: BLUF,

which stands for Bottom Line Up Front. Basically, it means

deliver your message simply and clearly. Don’t beat around

the bush. Don’t make people guess what’s important, and

don’t make them wait for the punch line. Lay out the intent

and then build on it. ‘‘And always remember,’’ says Clif,

‘‘once you’ve sold it—move on.’’

When you talk about the cloud with the CEO or the board,

don’t get lost in the technical details—talk about the result

and the value you plan to deliver. Don’t talk about the

TAKING ‘‘NO’’ OFF THE TABLE 177

C10 11/14/2011 14:48:36 Page 178

technology itself—talk instead about how the technology will

help the organization overcome specific business challenges

or achieve stated objectives.

‘‘Bring the conversation home and talk to people about the

specific problem you’re solving,’’ says Clif. ‘‘Stay focused on

the outcome.’’

178 ENTERING THE CLOUD

BAFTER 11/14/2011 15:41:22 Page 179

AFTERWORD: SPEND MORE TIME LEADINGTHE IT ORGANIZATION AND LESS TIME WOR-RYING ABOUT AGING CAPITAL EQUIPMENT

I thought it would be a nice idea to end the book with

excerpts from three interesting interviews that I conducted in

the summer of 2011. All three of the interviews focus on the

value of seasoned leadership in the IT organization.

Let’s begin with Bert Odinet. Bert is the Global CIO at

Freeport-McMoRan Copper & Gold. Freeport, a Fortune 500

company, has operations in the North America, South

America, Europe, Asia, and Africa. Freeport is the world’s

largest publicly traded producer of copper and molybdenum.

And it’s the single largest taxpayer in Indonesia, where it

owns the world’s largest copper and gold mine in terms of

recoverable reserves.

I cite these statistics to show the scope, scale, and complex-

ity of Freeport’s operations. In 2007, Freeport acquired cop-

per producer Phelps Dodge. Major acquisitions almost always

involve major integration efforts, and Bert’s role as CIO made

him a key player in the process.

In this case, the timing of the acquisition, and the sub-

sequent need for an enterprise-wide integration process, led

the company to make what I believe were some truly inspired

choices. Here’s the story in Bert’s own words:

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BAFTER 11/14/2011 15:41:22 Page 180

Both companies were spread wide geographically. The com-

bined business had operations on every major continent. We

knew that we had to globalize our processes. As we thought

about how to do that, we started looking at all of our redun-

dant core back office systems.

And when we looked down the silos of the business pro-

cesses—whether it was HR, commercial, or supply chain—

they didn’t necessarily fit very well. We didn’t have one exist-

ing solution that would scale for everyone.

A new ERP system seemed like the wisest choice. But there

were other factors, such as legacy infrastructure and applications.

Our hardware platform was late in its life cycle, especially on

the server side. The chip set was getting old. We knew we had

to port the core operating system and the applications. It was

the equivalent of replacing the engine and the transmission

in an old car. At some point, it makes more sense to buy a

new car.

We also wanted to get out of the data center business, which

meant doing a data center migration. When we looked at

everything we needed to do—implement an ERP, new plat-

form, data center migration—it all seemed like too much to

accomplish using traditional approaches.

And now the story gets really interesting. Instead of doing

it the old-fashioned way, Bert and his team decided to host

the new systems in a private cloud. In addition to saving

money and avoiding the headaches of managing their own

data center, their cloud strategy would greatly accelerate

the pace of the projects. Bert’s previous experience with

mainframe-to-client/server conversions back in the 1990s

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gave him the confidence and the knowledge he needed to

move forward with the cloud option.

The guiding principles are the same. If you can quickly provi-

sion an environment, then you have a lot more options. You

can have multiple versions running at once. Each developer

can potentially have his or her own versions, and each testing

group can have their own version. So the planning and sched-

uling of a giant integrated project becomes much simpler.

In a typical ERP project, you might be limited by sheer phys-

ical resources to seven or eight environments; if one group is

testing something and they want to take a checkpoint and go

back to the data as it existed two days before, then everyone

else had to take that checkpoint, too. That requires an im-

mense amount of forward planning.

Creating multiple environments in the cloud takes coordi-

nation, but it also gives you a lot of freedom, which then

allows you to accomplish things you couldn’t ordinarily do.

A perfect example was in our conversion testing. We

had three environments running in parallel, with the same

data. Environment A was the first run; environment B fol-

lowed it by a few hours and environment C followed that

one by a few hours. The team would run the conversion

program for a few hours in environment A and when we

found we had problems, we could fix it in environment B

before it ran into those problems. In the old model, you

used to have to take a checkpoint, fix your problems, re-

store the data, you lose a day or so getting back to that

point. You have to re-run those jobs all over again—only

to find out that you had another problem!

The goal, says Bert, is eliminating the interdependencies.

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BAFTER 11/14/2011 15:41:22 Page 182

As these projects scale up, they become more and more compli-

cated. The larger the system is, the more modules and the more

people involved—it gets exponentially more complicated and

more expensive.

In an ERP implementation, you might have 300 people on

the project team. If you need to keep all of them in sync, you

will need to do a lot of upfront planning. But if everyone is

free to do their own thing, you can do a lot less planning, and

the project will go a lot faster.

You will have the ability to do more testing and really make

sure the data is clean. Remember, this isn’t just about the proj-

ect schedule—it’s also about what happens after you cut over

to the new system. There’s a huge difference between being

99.99% ready and being 98% ready. With 99.99%, you have

a smooth stable system. With 98%, you have a mess that rap-

idly becomes very difficult to manage.

From Bert’s perspective, the cloud was ‘‘a consequence’’—

a means to an end, not an end in itself.

The ERP system doesn’t even know that it’s running in the

cloud. For us, the cloud enabled an important business pro-

cess transformation that, in turn, enabled the company to

move forward more quickly. The cloud doesn’t drive our busi-

ness decisions—but it’s helping us achieve our business goals,

faster and more economically.

Leveraging the Cloud to Drive Integration

The upside of free markets is that they typically bring out the

best in everyone. The downside is that free markets are

crowded with vendors who compete for your business. That’s

good and bad for CIOs. The good part is that you have more

182 AFTERWORD

BAFTER 11/14/2011 15:41:22 Page 183

choice and more leverage over pricing. The bad part is that

each vendor sells products that are different from the prod-

ucts sold by its competitors. And that means that you, the

CIO, has to make sure that all of those different product work

together seamlessly.

Nicholas Colisto is VP and CIO at Hovnanian Enterprises,

Inc., one of the nation’s largest residential homebuilders.

Before joining Hovnanian, he held key information technol-

ogy leadership positions at large organizations, including

Pepsi-Cola, Priceline.com, Hyperion Solutions, Boehringer-

Ingelheim, and Bayer Corporation (formerly Sterling Win-

throp). He’s seen the IT landscape from a variety of perspec-

tives, which makes him a valuable source of insight.

Like many CIOs, Nick faced the task of integrating numer-

ous disparate systems into one common company system.

Here’s the story in his own words:

When I joined the company in 2005, it had already made

multiple acquisitions over the years. The company was very

entrepreneurial and highly decentralized. The CEO wanted a

common operating platform so we could harmonize business

processes across the company. When we rolled out national

marketing programs, we wanted to make sure they were con-

sistent across our markets. When the business units prepared

their financial reports, we wanted them to be uniform across

the company. We also wanted our IT systems to be standard

and highly available. The companies we acquired had their

own IT systems, each with its own set of applications and

infrastructure.

Nick established a governance model, including a series of

process leadership committees, to establish a standard set of

AFTERWORD 183

BAFTER 11/14/2011 15:41:22 Page 184

business processes designed to increase sales, improve profit,

and enhance customer satisfaction across the company. IT

joined in the process design efforts, and led the initiative to

select software best suited to satisfy the new business require-

ments. After several years of hard work by many employees

across the company, an integrated suite of systems and pro-

cesses (including ERP, CRM, SCM, and BI) was delivered to

the business. The suite is called KHISS (the acronym for

K. Hovnanian’s Integrated Software System) and it’s now

used by more than 1,600 employees across the company. The

system has helped Nick and his team earn accolades within

the company as well as externally. Over the last few years,

Hovnanian Enterprises, Inc., has been recognized with seven

IT industry awards, including CIO 100 by CIO Magazine,

ComputerWorld’s Premier 100, InfoWorld 100, and Informa-

tionWeek 100, among others.

To achieve the agility and speed required to complete the

project successfully, Nick leveraged the cloud—50 percent of

the solution is hosted remotely using a SaaS model.

Going to the cloud really helped us accelerate the delivery of

the enterprise solution. It gave us much more agility by helping

us to rapidly and inexpensively provision software and infra-

structure resources. We didn’t have to concern ourselves with

setting up all the different environments—development, test,

production, fail-over, etc. We were able to get up to speed very

quickly with a comprehensive solution, which is hosted on pri-

vate and public clouds.

Disaster recovery was built into the solution as well. Inte-

gration is the circulatory system of KHISS and we were very

successful in achieving interoperability with our hybrid

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deployment model of public and private clouds. We were orig-

inally concerned about security, but we discovered that secu-

rity actually improved through centralization of data and

increased security-focused resources. Additionally, the solu-

tion required fewer IT skills internally. We also have a lot

more reliability with the platform and it’s much more scalable

than our previous disparate systems that were all hosted inter-

nally. Maintenance of the cloud computing applications is a

lot easier because they don’t need to be installed on desktops—

it’s all Internet-based.

This is a great example of how a savvy CIO can leverage

the cloud to drive integration across the enterprise. Nick and

his team use the cloud to streamline business processes and

drive down costs. It’s a classic case of IT helping the business

solve problems and overcome challenges. To me, that’s smart

leadership.

It's All about Leadership

I’m delighted that my conversations with Bert and Nick

brought us back to the topic of leadership, which is still the

core responsibility of the CIO.

A few weeks before wrapping up the manuscript, I had a

great conversation with my good friend Mark Polansky. Mark,

as many of you know, is Senior Client Partner and Managing

Director of the IT Officers Practice at Korn/Ferry Interna-

tional. From his post at Korn/Ferry, Mark has a genuinely

unique view of the evolving role of the CIO in the modern

enterprise. He also knows what CEOs and executive boards

look for when they are hiring a new CIO. Here are some nug-

gets of advice that Mark shared with me:

AFTERWORD 185

BAFTER 11/14/2011 15:41:22 Page 186

No matter how fast the technology landscape changes and

shifts, nothing beats good old fashioned leadership. You can

improve your leadership skills with a combination of formal

and informal training. Make sure you’re getting 360-degree

feedback. And don’t be afraid to look in the mirror.

Create the time for mentoring, in both directions. Find a

mentor for yourself, even if you’re a CIO reporting to the CEO.

Find a mentor on the board, or find a mentor from another

company—maybe the CIO at a bigger company. And make

sure that the people who report to you have mentors . . .

One of the biggest challenges facing CIOs is developing the

leadership skills of those behind them. Some of the world’s best

CIOs measure their success by the number of people who have

worked for them and then went on to become CIOs themselves.

I really like how Mark frames the CIO’s role in terms of

executive leadership instead of technology management. As

Mark says, CIOs have rightfully earned their seat at the table.

The enterprise needs their leadership—especially in today’s

uncertain times.

The Beginning of the Cloud Era

The cloud raises many significant technology questions. But

for the modern transformational CIO, here is one question

that trumps them all: Would you prefer spending your time

leading the IT organization and helping the company grow,

or tending an unruly tangle of legacy systems?

The cloud offers you an escape from the endless cycle of

upgrading and replacing capital equipment. The cloud lets

you focus on providing services instead of providing systems.

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Yes, it’s a whole new way of looking at IT. The old IT para-

digm was about processes; the new IT paradigm is about re-

sults. The cloud simply offers the fastest path to the new

paradigm.

Does that mean the cloud is the end of IT? Not by a long

shot. The cloud represents another stage in the evolution of

technology. I look at the cloud as a bridge that gets us from

where we are to where we want to be.

I am also convinced that the cloud’s moment has arrived,

and that the cloud will be with us for a while. Here’s why I

believe the cloud will continue growing for at least the next

decade.

Despite all the dire headlines and genuine distress about

various regional economies, the global economy is growing.

People all over the world are becoming wealthier. The most

obvious indicator of this new wealth is the growth of mobile

phone usage. We’re experiencing the greatest transformation

of human culture since the invention of the printing press, but

because we’re right in the middle of it, we can’t perceive the

enormity of the changes.

The explosive growth of mobile is driving the explosive

growth of social media, which in turn is driving the explosive

growth of Big Data. Make no mistake: We are now generating

new data at astonishing speed and unimaginable magnitude.

As a global culture, we have created a deluge of data. There’s

no place for all of this new data to go except into the cloud.

Big Data is driving the cloud and will continue to drive the

cloud, because Big Data is simply too big to exist on any sin-

gle system. Big Data is destined to live in the cloud because it

can’t live anywhere else.

AFTERWORD 187

BAFTER 11/14/2011 15:41:22 Page 188

If your company depends on data—and it’s hard to imag-

ine a company that doesn’t—you need a cloud strategy, to-

day. Maybe 10 or 20 years from now, we’ll invent a newer

technology that will make the cloud obsolete. That day will

come, no doubt. But for the now, smart money is betting on

the cloud.

188 AFTERWORD

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MEET OUR SOURCES

Rich Adduci joined Boston Scientific in

2006 as Boston Scientific’s chief information

officer (CIO). In his role as CIO, Rich has

led the transformation of Boston Scientific’s

IS organization, creating a Global IS organi-

zation focused on delivering competitive

advantage for Boston Scientific through in-

formation and technology.

Rich serves as a member of Boston Scientific’s Operating

Committee, Quality Management Board, and Capital Commit-

tee. Rich is actively engaged in shaping direction in the infor-

mation technology community at large through his active

participation in the SAP Life Sciences Advisory Committee,

Model N Strategic Planning Team, and the Babson CIMS Ad-

visory Board. Prior to joining Boston Scientific, Rich was a

partner at Accenture.

Rich earned a bachelor of science in industrial engineering

from Purdue University and an MBA from the University of

Chicago with concentrations in finance and economics. Rich

is an active member of his community and presently serves

on the Boston area American Heart Association executive

board.

Rich Adduci

189

BACK 11/21/2011 10:47:6 Page 190

Ram�on Baez has been chief information

officer and vice president for information

technology services of Kimberly-Clark Corp.

since February 15, 2007. He is responsible

for leading Kimberly-Clark’s enterprise-wide

information systems initiatives to support its

future growth and to maximize the return

on its information technology investments.

Ram�on began his career at Northrop Grumman Corpora-

tion. He served as chief information officer of Thermo Fisher

Scientific, Inc., where he was responsible for coordinating

and directing worldwide information systems. Ram�on also

served as chief information officer and vice president for In-

formation Technology of Honeywell International Automa-

tion and Control Solutions group, where he led the Global IT

organization of this diversified industrial, service, and solu-

tions company. He serves as a member of the National Advis-

ory Board at HMG Strategy LLC. Ram�on holds a bachelor of

science degree in business administration from University of

La Verne in California.

Mike Blake came to the Hyatt CIO role

from his prior position as vice president of

finance for global marketing, brand stan-

dards & IT for Hyatt Corporation. Mike has

over 20 years of experience in finance and

technology in various roles and is charged

with providing strategic leadership and

sound perspective that contributes to the

management and evolution of Hyatt’s

Ram�on Baez

Mike Blake

190 MEET OUR SOURCES

BACK 11/21/2011 10:47:7 Page 191

global IT functions. He is responsible for driving innovation

and supporting revenue growth.

Prior to his role with Hyatt, Mike was senior vice president

of IT for First Data, vice president of IT finance at Kaiser

Permanente, and director of IT finance for Sears, based in

Chicago, Illinois. In each of his roles, he was the highest-ranking

IT finance resource and key internal consultant and advisor to

national senior leadership teams. Prior to that, Mike was

director of financial planning & analysis for Commerx, a B2B

startup, and director of financial planning for United Airlines.

Becky Blalock is the former senior vice

president and chief information officer of

Southern Company, where she directed in-

formation technology strategy and opera-

tions across 120,000 square miles and nine

subsidiaries. In her role as CIO, she led

more than 1,100 employees in information

technology delivery at one of America’s

most respected companies. Becky provided

broad leadership in many positions including accounting,

finance, marketing, corporate communication, external affairs,

the office of the CEO, and customer service.

A graduate of Leadership Atlanta and Leadership Georgia,

she was named a Fellow of the International Women’s Forum

Leadership Foundation in 2001. Becky has received a host of

honors, including 2009 CIO of the Year in the electric utility

industry by Energy Biz magazine, 2007 CIO of the Year by

Computers for Youth, and 2003 Georgia CIO of the Year,

Becky Blalock

MEET OUR SOURCES 191

BACK 11/21/2011 10:47:7 Page 192

Global Category by the Georgia CIO Leadership Association.

She is listed among the Who’s Who in Science and Engineer-

ing. In 2006, she was inducted as one of Computerworld

magazine’s Premier 100 IT Leaders. Atlanta Woman maga-

zine named her their Power Woman of the Year and she

received the Shining Star Award from the Atlanta Women’s

Foundation. She successfully completed the Program for

Management Development at Harvard University. She holds

a master’s degree with honors in business administration

from Mercer University and an undergraduate degree in busi-

ness administration from State University of West Georgia.

Brian Bonner is the chief information offi-

cer at Texas Instruments. He is responsible

for global management of all aspects of IT

and is a member of the company’s strategic

leadership team.

Prior to becoming CIO at Texas Instru-

ments, he served as the company’s vice

president, analog acquisition integrations. Before that, he was

the company’s vice president, worldwide mass marketing.

He is a graduate of The Fuqua School of Business at Duke

University. Brian began his professional career as an engineer

at Chrysler and joined Texas Instruments in 1995. In addition

to his MBA, he holds a bachelor’s degree in physics from

Kalamazoo College and a master’s degree in electrical engi-

neering from the University of Michigan.

Brian Bonner

192 MEET OUR SOURCES

BACK 11/21/2011 10:47:8 Page 193

Robert B. (Rob) Carter is executive vice

president of FedEx Information Services

and chief information officer of FedEx

Corp. He is a member of the five-person

executive committee, which plans and

executes the corporation’s strategic busi-

ness activities. He is responsible for set-

ting technology direction, as well as the

corporation’s key applications and tech-

nology infrastructure. FedEx applications, advanced net-

works, and data centers provide around-the-clock and

around-the-globe support for the product offerings of

FedEx. Rob joined FedEx in 1993 and has over 30 years of

systems development and implementation experience.

Rob was born in Taiwan. He earned his bachelor’s de-

gree in computer and information science from the Univer-

sity of Florida and his master’s degree from the University

of South Florida. His professional awards include: Fast

Company magazine named #18 on ‘‘100 Most Creative Peo-

ple in Business’’ (2010); Information Week Chief of the

Year Award (2000, 2001, 2005); CIO magazine’s 100 Award

(2000, 2001, 2002, 2003, 2004, 2006); and InfoWorld Chief

Technology Officer of the Year (2000). He is a member

of the Saks Inc. board of directors and the University of

Florida Foundation board of trustees. Rob also serves as

chairman of the capital campaign for the University of Ten-

nessee Hamilton Eye Institute and as a member of the

Memphis Riverfront Development Corporation and the Life-

Blood Foundation.

Robert B. (Rob)Carter

MEET OUR SOURCES 193

BACK 11/21/2011 10:47:8 Page 194

Trae Chancellor is the VP of global enter-

prise strategy of Salesforce.com. He joined

Salesforce.com as CIO in 2006. Under his

leadership, the IT division successfully tran-

sitioned its operations to the cloud. Building

on Salesforce.com’s own platform as a ser-

vice, For ce.com, Trae and hi s team deployed

new automation systems that effectively sup-

ported the business as it grew from $400

million in annual revenue to $1 billion.

In his current role, Trae shares his experience of ‘‘taking

it to the cloud’’ with large enterprises, helping them con-

struct best-practices models for successfully adopting

cloud-based computing. Additionally, Trae will transform

these best practices into market-meeting requirements for

Salesfo rce.com’s emerging applica tions an d dev elopment

platform.

In 2009, Trae won Information Week’s top innovator

award in high tech and was number five overall for his

leadership in cloud computing and IT transformation. Prior

to Salesforce.com, Trae wa s VP of IT application e ngineer-

ing at PeopleSoft/Oracle. While there, he drove the imple-

mentation of enterprise client/server applications for the

business. Trae also led the team responsible for merging

J.D. Edwards’ IT environment into PeopleSoft. As a pio-

neer in software-as-a-service (SaaS) technology and opera-

tional models, Trae was part of the original engineering

team at ExpertCity (acquired by Citrix) who built GoTo-

MyPC and GoToMeeting.

Trae Chancellor# 2008 Eric Millette,All Rights Reserved

194 MEET OUR SOURCES

BACK 11/21/2011 10:47:9 Page 195

Trae holds a BS degree in nuclear engineering from Texas

A&M.

Nicholas R. Colisto is a senior informa-

tion technology executive with experi-

ence providing innovative, business-

driven IT solutions. He serves as the vice

president and chief information officer at

Hovnanian Enterprises, Inc., a large resi-

dential homebuilder.

Prior to joining Hovnanian, Colisto held key information

technology leadership positions at large organizations,

including Pepsi-Col a, Priceline.com, Hyperion Solutions,

Boehringer-Ingelheim, and Bayer Corporation (formerly

Sterling Winthrop).

Colisto is very active in the information technology, edu-

cation, and health care communities. He has served on the

Governing Body for the CIO Leadership Network and has

been a speaker at the executive summits. He is a member of

the Society for Information Management (SIM) and has

served on its programs committee. Colisto taught a master’s

program in information technology at Manhattanville

College in New York for several years and also served on its

advisory board. He lectured at Columbia University’s CIO

Leadership Workshop. He currently serves on the Industrial

Advisory Board at Rutgers University, on the Educational

Advisory Board at Brookdale College in New Jersey, and on

the Foundation Board of Trustees for Bayshore Community

Hospital.

Nicholas R. Colisto

MEET OUR SOURCES 195

BACK 11/21/2011 10:47:9 Page 196

He is the recipient of many industry awards, including the

2011 Computerworld Premier 100 IT Leaders Award, 2010

CIO 100 by IDG’s CIO Magazine, 2009 InfoWorld 100, 2009,

and 2010 InformationWeek 500, and the 2011 InfoWorld

Green 15 Award.

Colisto holds a B.B.A in management information systems

and an M.S. in information systems from Pace University.

He lives with his wife and two children in Marlboro, New

Jersey.

Jim Comfort received his Ph.D. from the

Massachusetts Institute of Technology in

1988. He joined IBM Research in 1988 and

worked across the boundaries from Re-

search to Systems and Technology Group

on new product introduction in a variety

of development and product management

roles. Jim held a number of executive

positions within IBM Systems Group, spanning technology

development, systems development, and product line man-

agement, as well as roles in IBM Corporate Strategy. For the

past two years, he was part of the Enterprise Initiatives team

in Corporate Strategy, defining IBM’s cloud computing strat-

egy from technology, offerings, and business model perspec-

tives. He is currently vice president, Integrated Delivery

Platforms, Cloud Computing. He is responsible for technical

and investment strategy to accelerate and expand asset

utilization in IBM’s outsourcing business, defining roadmaps

that consistently deliver innovations such as cloud computing

capabilities to IBM’s outsourcing innovation.

James H. Comfort

196 MEET OUR SOURCES

BACK 11/21/2011 10:47:10 Page 197

Barbra Cooper is group VP and CIO for

Toyota Motor Sales (TMS) North America.,

Inc. She is responsible for the strategy, de-

velopment, and operation of all systems

and technology that support TMS.

With a career spanning more than 30

years in IT, Barbra joined Toyota in 1996 as

VP of IS. Previously, she held the position of group VP and

CIO for MicroAge Corp., CIO for Maricopa County in Phoe-

nix, VP of Technology for American Express, and director of

IS for Miller & Paine.

Barbra was named one of the Top 100 Women in Comput-

ing in 1996, a national honor recognizing women in the IS

field who have achieved both technical expertise and ad-

vanced management positions. Additionally, she was hon-

ored as one of Computerworld ’s Premier IT Leaders in 2001.

Cooper received the CIO 100 Award in 2005. CIO Insightmag-

azine ranked her sixth of the top 100 global CIOs in 2007, and

CIO magazine’s Executive Council awarded her the 2007

Distinguished Member Award for Most Valuable Content. She

has also been recognized for her automotive industry

achievements, including the 2000, 2005, and 2007 Automotive

News awards for the 100 Leading Women in the automotive

industry. Barbra was inducted into the CIO Hall of Fame in

2007 for strongly influencing the evolution of this young

profession over the last decade and for expanding IT strategic

possibilities.

Barbra Cooper

MEET OUR SOURCES 197

BACK 11/21/2011 10:47:10 Page 198

Tim Crawford is VP of information

technology and CIO of All Covered, a divi-

sion of Konica Minolta Business Solutions

USA Inc.

Hehas over 20 years of information technol-

ogy experience in operations, infrastructure,

information security, and core applications.

Areas of focus include cloud computing, infra-

structure optimization, and key game-chang-

ing strategies for IT organizations.

Tim regularly speaks at industry conferences and has writ-

ten for leading publications. Tim serves on a number of

boards, including the Society for Information Management

(SIM) and Data Center Pulse.

Tim received an MBA in international business with honors

and a bachelor of science degree in computer information

systems, both from Golden Gate University.

Martin Davis is the EVP, technology and

operations group of Wells Fargo & Company.

He provides executive leadership to the

Technology Integration Office and is ac-

countable for overseeing technology inte-

gration efforts for Wells Fargo, ensuring the

highest level of security for customer data,

continuing the availability of systems, and

minimizing transition risk for the enterprise.

Tim CrawfordPhotographer: GeneGouss, Gene GoussPhotography. Title:Tim Crawford, AllCovered/KonicaMinolta. Copyrightdate: 5/13/11

Martin Davis

198 MEET OUR SOURCES

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Prior to Wachovia’s acquisition by Wells Fargo, Martin was

Wachovia’s corporate CIO, where he led more than 2,700

employees and oversaw Wachovia’s application development

and maintenance activities. Martin was accountable for the

strategic and business processes within the CIO organization

and was responsible for the consistency, standardization,

and prioritization of all centrally driven technology initia-

tives across the enterprise. Martin began his career with

Wachovia in 1985 and served in a number of roles supporting

technology functions for Wachovia’s Commercial, Wealth,

and Brokerage groups.

He received his bachelor of arts degree in business adminis-

tration from Winston-Salem State University in North Carolina

and is a graduate of the Young Executives Institute and

the Executive Leadership Program at the University of North

Carolina–Chapel Hill. He has been recognized as one of the 50

Most Important African Americans in Technology by US Black

Engineer magazine and as one of the 75 Most Powerful African

Americans in Corporate America by Black Enterprise magazine.

Stephen J. Gold is the senior vice presi-

dent and chief information officer of

Avaya. He is responsible for all aspects of

Avaya’s technology strategy, as well as

leading IT excellence across Avaya busi-

ness operations and systems globally. This

includes identifying and prioritizing strate-

gic IT initiatives to ensure Avaya remains

at the forefront of technology while driving efficiencies

across business functions.

Stephen Gold

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Prior to joining Avaya, Stephen was executive vice presi-

dent, CIO, and corporate chief technology officer of GSI

Commerce. He also served as senior vice president and CIO

for Medco Health Solutions, and he has held other positions

of increasing responsibility at Medco, Dun & Bradstreet, and

Sandoz Pharmaceuticals.

Stephen holds a BS in computer science from St. John’s

University.

In January 2009, Leslie Gordon was named

vice president, application and infrastructure

services management, reporting to the IBM

CIO. The mission of her global organization

is to deliver world-class IT services and ena-

ble IBM’s internal transformation by leverag-

ing IT to support IBM’s enterprise strategy.

In prior roles, she has been an executive in the Storage and

Technology organization, responsible for leading growth ini-

tiatives to leverage the power of optimization and virtualiza-

tion across the infrastructure layer. The Enterprise Computing

Model project was launched in 3Q 2007 to address current cli-

ent priorities (enhance ‘‘green’’ corporate standing, reduce IT

infrastructure costs, optimization, virtualization, power and

cooling constraints) as well as an opportunity for IBM to col-

laborate more effectively across the entire depth and breadth

of technology, financial, and business solutions for clients.

This transformational project encompassed significant imple-

mentation within the IBM Global Account, the Strategic Out-

sourcing (services) client base, and continuing development

of solutions for the external client marketplace.

Leslie L. Gordon

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Leslie has held multiple leadership and management roles

in hardware and software product development primarily in

the IBM printer and copier business areas and later in the IBM

Publishing Systems Business Unit headquartered in Boulder,

Colorado. In addition, Leslie has extensive experience in

a wide range of services-related management roles in the

Americas as well as an international assignment to Sydney,

Australia. These include project executive roles at two large

outsourcing contracts in the banking and aerospace indus-

tries, and senior delivery project executive and delivery man-

agement. She is also a certified project manager.

Leslie graduated with a bachelor of science degree in me-

chanical engineering from Duke University. She joined IBM

in 1982 as a manufacturing engineer in Charlotte, North Caro-

lina, and has had extensive experience across multiple busi-

ness areas and divisions of IBM.

Allan Hackney is SVP and chief informa-

tion officer at John Hancock Financial

Services with oversight of the company’s

Wealth Management and Insurance

technical teams. In this role, Allan is ac-

countable for developing and executing

strategies that increase productivity and

efficiency, improve operating risk man-

agement, and enhance the technical talent across the

entire enterprise. Allan joined John Hancock from AIG

Consumer Finance Group where, as CIO, he championed

the effort to reposition autonomous banking and lending

operations into a more integrated global expansion plat-

form to enable significant expansion.

Allan Hackney

MEET OUR SOURCES 201

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Allan graduated with a bachelor’s degree from Colgate Uni-

versity. He is a Faculty Fellow at The Levin Institute, the State

University of New York’s international graduate business

school in New York City. Allan is also on the regional board

of BuildOn, a nonprofit organization that empowers youth in

the United States to make a positive difference in their com-

munities while helping people of developing countries in-

crease their self-reliance through education.

Kim Hammonds is chief information offi-

cer of The Boeing Company. Hammonds is

responsible for the IT strategy, operations,

processes, and more than 8,500 IT people

of the world’s largest aerospace company.

She has responsibility for supporting the

growth of Boeing’s business by partnering

with the business units on IT-related

revenue-generating programs and oversees all aspects

of information security across the global reach of the

company.

Prior to joining Boeing, she was director of Americas

Manufacturing Operations at Dell, where she was responsible

for global systems development for service logistics, supply

chain, and quality systems. She was also responsible for

IT production support for all 18 global manufacturing

operations.

Kim received an MBA from Western Michigan University

and a bachelor’s degree in mechanical engineering from the

University of Michigan.

Kim Hammonds

202 MEET OUR SOURCES

BACK 11/21/2011 10:47:13 Page 203

As Avanade’s chief technology officer,

Tyson Hartman is responsible for Ava-

nade’s technology vision, solutions, and

R&D investments. Focusing on how best to

leverage the latest Microsoft technology to

solve customer problems, Tyson leads the

incubation and engineering teams to de-

liver differentiated solutions across the

complete enterprise IT life cycle.

Tyson joined Avanade in June 2000 and has held various

positions in his more than ten years with the company. Prior

to his role as Global CTO, he served as Americas CTO, lead-

ing teams on major technology, strategy, and quality initia-

tives. As a member of Avanade’s first engineering group, he

was instrumental in developing solutions and assets for some

of Avanade’s first key customers. Previously, Tyson was with

Accenture, where he focused on e-commerce and high-

volume online transaction processing systems in the high-

tech, communications, and consumer products industries.

Tyson is a sought-after expert and author, with particular

expertise in subjects such as cloud computing, SOA, application

integration, and high-volume transaction

systems. Tyson holds a bachelor’s degree in

computer science and computer engineering

from the University of Southern California.

Donagh Herlihy is SVP and CIO at Avon

Products, Inc. He leads an IT organization

of 1,500 professionals and is responsible

Tyson Hartman

Donagh Herlihy

MEET OUR SOURCES 203

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for global IT strategy and operations. His team provides the

business systems and technology infrastructure supporting

Avon’s business operations in more than 60 countries and is

responsible for enabling online business for more than six

million Avon representatives worldwide. Major initiatives in-

clude driving growth through Web and mobile platforms for

Avon representatives and consumers and driving efficiency

through global ERP.

Prior to joining Avon in 2008, he drove the organizational

and business process transformation at the Wrigley Company

as CIO, VP of human resources, and VP of supply chain strat-

egy and planning. Herlihy also spent six years at Gillette,

leading IT at its Duracell subsidiary. Earlier in his career,

while based in the UK, he worked in manufacturing, business

process reengineering, and IT in the consumer goods and

automotive sectors.

Donagh holds a BS in industrial engineering from the Dublin

Institute of Technology and Trinity College, Dublin, Ireland,

and has completed the Executive Program at the University of

Michigan, Ross School of Business. He is a board member of

the American Red Cross in Westchester, New York.

John F. Hill is Global CIO of Veyance

Technologies, the exclusive manufacturer

of Goodyear Engineered Products world-

wide. He was a former chief technology

officer at Siemens IT Solutions and Services,

where he was responsible for all technol-

ogy aspects of the firm’s IT services clientsJohn Hill

204 MEET OUR SOURCES

BACK 11/21/2011 10:47:14 Page 205

and the 4,700 Siemens IT Solutions and Services employees

in North America. Throughout his career, John has consis-

tently demonstrated innovative approaches to IT strategies

that drive business competitiveness.

Prior to joining Siemens, he was vice president and CIO

at Praxair, Inc., the largest supplier of industrial gases in

North and South America, with $6 billion in revenue and

24,500 employees. Prior to Praxair, he was vice president

of IT at the Perkin-Elmer Corporation, leading a global

team of IT professionals serving employees in 14 countries.

John has also run a successful independent IT consultancy.

His early IT experiences include positions with Combustion

Engineering, Pitney Bowes, and Andersen Consulting. He

has also served on the board of directors for numerous

technology firms.

John received a BA from Princeton University where he

majored in politics and minored in mathematics.

Mark Hillman leads strategy and imple-

mentation teams for Compuware products

and services. Mark ensures Compuware’s

extensive portfolio continues solving

operational challenges as applications and

infrastructure increase in complexity. He

collaborates with customers, analysts, and

industry thought leaders to identify the

most pressing IT challenges businesses face today in order

to ensure the strategy and implementation of Compuware

products and services provide superior value.

Mark Hillman

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Prior to Compuware Corporation, Mark held senior IT

executive positions at General Motors, including director of

GM Global Computing Operations and director of Supply

Chain Operations. Before General Motors, Mark served in

marketing, product management, and information technol-

ogy at Texas Instruments.

During his 21 years with Chevron, Randy

Krotowski has held a variety of technol-

ogy and business management positions.

As manager, Strategic Planning for Chev-

ron’s IT division, he led a $270 million effort

to upgrade Chevron’s global infrastructure

andWeb application development capabili-

ties. He has held management positions in

organizational development, marketing, engineering, joint ven-

tures, Total Quality Management, and large capital project

management.

Randy holds a bachelor’s degree in chemical engineering

from the University of Toronto and a master’s in business ad-

ministration from Golden Gate University. He is active in a

number of engineering, IT, and project management associa-

tions. He chairs the Technology Strategy

and Transformation Standing Committee.

Tony Leng is a managing director of Diversi-

fied Search and heads the CIO, Technology,

and Private Equity practices. He also leads the

firm’s San Francisco office. Previously, Tony

was Managing Partner of Hodge Partners.

Randy Krotowski

Tony Leng

206 MEET OUR SOURCES

BACK 11/21/2011 10:47:15 Page 207

His clients include public and private companies where he

has placed board members and C-level executives. He has con-

ducted senior management assignments for Hypercom, JDA

Software, MSquared, QRS, Broadvision, Delta Dental, Catholic

Healthcare West, Kaiser Permanente, Visa, Symmetricom, Key

Principal Partners, OpenTV, Cerberus Capital, The Riverside

Company, Vistage, and the Young Presidents’ Organization.

Prior to his executive search experience, Tony was a board

member of three public companies and CEO of a $600 million

public diversified IT company that controlled businesses in

software, communications, services, distribution, integration,

defense technology, and outsourcing. Before that, Tony ran a

more than $1 billion division of a telephone company focused

on corporate users and had responsibility for all data services

and networking products. While at the telephone company,

he was founder and chairman of its ISP and a board member

of its two million–subscriber cell phone–associated company.

Previously, Tony was the CEO of a multibranch, 600-person

credit bureau that provided consumer and commercial infor-

mation. During his five-year tenure, he grew the enterprise

value fivefold.

Tony uses his operating and board experience, combined

with the knowledge that he has gained in the search industry,

to drill down and understand at a nuanced level what his cli-

ents are seeking to achieve as they build their teams and

boards. His experience in working at both large and small

companies has made him particularly effective in understand-

ing the challenges and leadership requirements that busi-

nesses face as they grow.

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Tony received a bachelor of commerce (with honors)

from the University of Cape Town, South Africa. He is quali-

fied as a chartered accountant and certified public

accountant.

Tod Nielsen joined VMware in January

2009 as chief operating officer. Prior to

VMware, he served as president and

chief executive officer of Borland Soft-

ware since November 2005. Prior to Bor-

land, he held several key executive

management positions at leading soft-

ware companies including Microsoft,

BEA, and Oracle. Tod brings more than 20 years of lead-

ership experience in enterprise software and application

development to VMware. Prior to Borland, he served as

senior vice president, marketing and global sales support

for Oracle Corporation.

Prior to Oracle, he was the chief marketing officer and

executive vice president of engineering at BEA Systems,

where he had overall responsibility for BEA’s worldwide mar-

keting strategy and operations, as well as all research and de-

velopment operations. Tod joined BEA after the acquisition of

his private company, Crossgain Inc., where he served as its

chief executive officer. Tod also spent twelve years with

Microsoft Corporation in various roles, including general

manager of Database and Developer Tools, vice president of

Developer Tools, and vice president of Microsoft’s Platform

Group.

Tod Nielsen

208 MEET OUR SOURCES

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Bertrand Odinet has served as vice

president and chief information officer of

Freeport McMoRan Copper & Gold since

2003. Since joining Freeport-McMoRan

Copper and Gold in 1995, Bert has assumed

responsibilities in corporate IT, operational

improvement, merger integration, and fi-

nancial shared services. Prior to joining FCX, Bert held several

management positions with Arthur Andersen and Andersen

Consulting, where he was a management consultant in the

manufacturing, aerospace and defense, and oil and gas indus-

tries. He received his B.S. in civil engineering from Louisiana

State University.

Tom Peck is the chief information officer

(CIO) of Levi Strauss & Co., responsible for

leading the company’s global information

technology operations and services. Tom

reports to Chief Executive Officer John

Anderson and is a member of the com-

pany’s worldwide leadership team.

Tom has a history of creating technology solutions for

global consumer and entertainment brands via large-scale in-

vestments in SAP and Oracle, vendor-managed inventory

(VMI) and customer relationship management. Prior to join-

ing Levi Strauss & Co., he was the CIO of MGM Mirage, sup-

porting 70,000 employees across 17 global resorts such as the

Bellagio and MGM Grand. As CIO, he led numerous innova-

tions across hotel and casino operations as well as the com-

pany’s 800þ retail and restaurant venues.

Bertrand Odinet

Tom Peck

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Before joining MGM Mirage, Tom held numerous roles

within General Electric Company, including CIO of NBC Uni-

versal’s global entertainment businesses, which included tele-

vision, motion pictures, home entertainment, consumer

products, and theme parks and resorts. While CIO, his team

implemented a global enterprise-wide project that spanned

15 operating companies in 28 countries via SAP and other sys-

tems platforms, upgraded 25-year-old legacy systems, simpli-

fied numerous processes, and expanded VMI to more than

50 retail partners around the world.

Tom began his career in the United States Marine Corps

holding numerous finance and technology jobs. He is also a

certified Six Sigma Master Black Belt and is proficient in

process optimization strategies such as lean supply chain.

Tom earned his bachelor’s degree from the United States

Naval Academy with distinction in economics, and a mas-

ter’s degree in management from the Naval Postgraduate

School.

Steve Phillips is senior vice president and

chief information officer for Avnet, Inc. He

is also a member of the Avnet executive

board and a corporate officer.

In 2011, Computerworld named Steve a

Premier 100 IT Leader. This lifetime re-

cognition honors executives for exceptional

technology leadership, innovative ideas to

address business challenges, and effectively managing IT

strategies.

Steve Phillips

210 MEET OUR SOURCES

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Steve holds a BSc (Hons) in electronic engineering from

Essex University and a postgraduate diploma in management

studies from Thames Valley University. He is a Fellow of the

Institution of Engineering & Technology.

Steve Phillpott is CIO for Amylin Pharma-

ceuticals, a leading provider of drugs for the

treatment of diabetes. Mr. Phillpott has over

20 years of broad experience in information

technology and management that includes

Fortune 500 and large global manufacturing

companies.

Prior to joining Amylin, Steve was CIO of Proflowers.com,

a high-volume e-commerce retailer. Steve was VP of IT for

Global Enterprise Applications at Invitrogen (now Life Tech-

nologies Corp). Prior to that, he held various leadership posi-

tions at companies, including Memec (Avnet), Gateway, and

Qualcomm.

Steve received his BS in engineering from the U.S. Naval

Academy and has his MBA in technology management.

Mark Polansky is a senior client partner

and the managing director of Korn/Ferry

International’s Information Technology

Center of Expertise for North America.

With more than 25 years of executive

search experience, all in technology, Mark

has extensively recruited chief information

officers, chief technology officers, and

Steve Phillpott

Mark Polansky

MEET OUR SOURCES 211

BACK 11/21/2011 10:47:18 Page 212

other senior IT leaders across a wide range of vertical indus-

try sectors. He also has expertise in recruiting for both gen-

eral and technical management for public and private high-

tech companies, managed service providers, professional

services organizations, venture firms, and their portfolio

companies.

Before entering the search field, Mark spent 11 years in

computer programming, systems management, and business

development at two large information technology organiza-

tions engaged in the development, support, and marketing of

information systems in the financial services and higher edu-

cation sectors.

Mark previously taught computer science at Pratt Institute,

Brooklyn College, and Southern Connecticut State University.

He currently serves on the advisory board of Columbia Uni-

versity’s executive graduate program in information technol-

ogy management.

He frequently addresses conferences and writes on infor-

mation systems subjects as well as career management and

human resources topics, and he is the creator of the ‘‘Execu-

tive Career Counsel’’ column in CIO Magazine. He is a mem-

ber of the Society for Information Management, previously

serving as chairman and president of the New York Metro

Chapter. Mark currently serves on the advisory boards of The

Information Technology Senior Management Forum, the na-

tional organization dedicated to fostering executive talent

among African-American IT professionals; and HITEC, the

Hispanic Information Technology Executive Council.

212 MEET OUR SOURCES

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Mark holds a master’s degree in computer science from

Pratt Institute and a bachelor’s degree in mathematics and

electrical engineering from Union College.

Tony Scott joined Microsoft Corp. in

February 2008 as corporate vice president

and chief information officer (CIO). Under

Scott’s leadership, Microsoft IT is responsi-

ble for security, infrastructure, messaging,

and business applications for all of Micro-

soft, including support of the product

groups, the corporate business groups, and

the global sales and marketing organization.

Before joining Microsoft, Tony was the senior vice

president and chief information officer for Walt Disney

Co., where he led planning, implementation and opera-

tions of Disney IT systems and infrastructure across the

company. He also held the position of CTO, Information

Systems and Services, at General Motors Corp. (GM),

where he was responsible for defining the information

technology computing and telecommunications strategy,

architecture, and standards across all of GM’s businesses

globally.

Tony has a bachelor of science in information systems

management from the University of San Francisco and

also holds a Juris Doctorate with a concentration in intel-

lectual property and international law from Santa Clara

University.

Tony Scott

MEET OUR SOURCES 213

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Esat Sezer was named senior vice presi-

dent and chief information officer on Octo-

ber 11, 2006, at Coca-Cola Enterprises. He

oversees the company’s technology and in-

formation capabilities and reports to John

F. Brock, president and chief executive offi-

cer. Esat has more than 25 years of global IT

experience. Most recently, he served as cor-

poration vice president and chief information officer for

Whirlpool Corporation, a position he held since 2002.

Prior to joining Whirlpool Corporation as vice president,

Global Information Services in 2001, he held several positions of

increasing responsibility with Colgate-Palmolive Co., including

director, Global Information Technology (1999–2001); director,

Europe/Africa/Middle East Division (1996–1998); associate

director, Global Applications (1996–1997); and director, Infor-

mation Technology (1994–1996 in Warsaw, Poland; 1991–1994

in Istanbul, Turkey). From 1988 to 1991, he was a senior consul-

tant at Andersen Consulting in London.

Born and raised in Istanbul, he received his bachelor of sci-

ence degree in electrical engineering from Istanbul Technical

University. Esat is currently a board member on the advisory

group for the nonprofit organization Com-

puters for Youth and an advisory board

member of several technology companies.

David Smoley is the senior vice president

and chief information officer of Flextronics

International, a $26 billion global manufac-

turing and services provider operating in

Esat Sezer

Dave Smoley

214 MEET OUR SOURCES

BACK 11/21/2011 10:47:19 Page 215

more than 30 countries worldwide. Information Week re-

cently ranked Dave as one of the top 50 global CIOs, calling

him an IT leader changing the business world.

Prior to his time at Flextronics, Dave served as vice presi-

dent and chief information officer at Honeywell’s Aerospace

Electronics Systems. Dave’s extensive IT career also includes

management positions with General Electric, where he most

recently held the position of director and chief information

officer for GE Power Controls in Barcelona, Spain.

Dave has a BA in computer science from Clemson Univer-

sity and an MBA from the University of Virginia’s Darden

School of Business.

Randall (Randy) N. Spratt is executive

vice president, chief technology officer,

and chief information officer for McKesson

Corporation.

As CTO, Randy guides the overall

technology direction for the company’s

health care technology products and

provides support and guidance for application develop-

ment processes company-wide.

As CIO, Randy is responsible for all technology initiatives

within the corporation. He has been with McKesson for more

than 18 years, most recently as chief process officer for

McKesson Provider Technologies (MPT), the company’s med-

ical software and services division based in Alpharetta,

Randy Spratt

MEET OUR SOURCES 215

BACK 11/21/2011 10:47:19 Page 216

Georgia. He also managed MPT’s Business Development, In-

formation Technology, and Strategic Planning offices, as well

as MPT’s Technology Services business.

Prior to joining McKesson, Randy held executive positions

of increasing responsibility at the start-up Advanced Labora-

tory Systems (ALS), culminating with the role of chief opera-

tions officer. ALS was acquired by HBOC in 1996, which in

turn was acquired by McKesson in 1999, and Randy took on

responsibility for HBOC’s laboratory systems business shortly

thereafter. Following the acquisition of HBOC by McKesson

in 1999, Randy relocated to Georgia to become part of the

reconstructed management team.

Randy earned a bachelor of science degree in biology, with

a minor in computer science, from the University of Utah.

As vice president, CTO for Cloud Comput-

ing and Growth Initiatives on the IBM

Corporate Strategy team, Lauren States is

responsible for the technology strategy for

IBM’s growth initiatives, including cloud

computing, Smarter Planet, business ana-

lytics, and emerging markets.

In her previous role as vice president of Cloud Computing

for IBM Software Group, Lauren led a global team responsible

for establishing market leadership for cloud computing. Her

team engaged directly with clients to deliver leading-edge ca-

pabilities, incorporating their technology requirements into

IBM’s strategy, offerings, and plans.

Lauren C. States

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As a senior executive on IBM’s Integration and Values

Team, Lauren played a leadership role in a company-wide ini-

tiative called the Client Value Initiative—a strategic reshaping

of IBM’s value creation. She was responsible for integrating

and transforming IBM’s processes for skills development,

knowledge management, and career progression for IBM’s

professional sales force.

In a previous role, Lauren led worldwide Technical Sales

and Sales Enablement for IBM Software Group. She was re-

sponsible for the 5,000þ technical sales organization and for

sales enablement and customer software deployment across

IBM’s total software business.

Lauren joined IBM in 1978 as a systems engineer in New

York City and has held a variety of leadership positions since

that time. In 1991, Lauren joined IBM’s client/server business

initiative, taking responsibility for developing new markets

and laying the groundwork for distributed computing. Later,

she led IBM’s Midwest sales territory, delivering e-business

and early Web solutions to all types of clients.

Lauren graduated from the University of Pennsylvania

Wharton School with a bachelor of science degree. She has

served on the IBM Technical Leadership Team, which is re-

sponsible for the development and advancement of IBM’s

technical workforce. As a role model and mentor to women

and minorities around the world, Lauren co-chairs the IBM

North America Black Constituency Council. She is chair of the

board of visitors for the Northeastern University College of

Business and serves on the International House, New York,

MEET OUR SOURCES 217

BACK 11/21/2011 10:47:20 Page 218

board of trustees. She also serves on the board of directors for

Mo Jo (www. mo m sa nd job s.c om) an d i s a m embe r o f th e

Executive Leadership Council.

In 2003, Lauren received the Women of Color Technology

Conference’s Managerial Excellence Award from Career Com-

munications Group, Inc. In 2006, she was recognized as one

of the 25 Most Influential Black Women in American Business

by The Network Journal. She was also named one of the Top

100 Blacks in Technology in 2006 and 2007 by Career Com-

munications Group, Inc.

Pat Toole is general manager of Mainte-

nance and Technical Support Services—

Global Technology Services at IBM. Previ-

ously, he served as IBM’s chief information

officer. As CIO, he was responsible for ad-

vancing the company’s transformational

agenda and aligning information technol-

ogy investments to the business strategy.

Prior to that, Pat was general manager of Intellectual Property

at IBM, overseeing the direction of the company’s intellectual

property portfolio and global patent program.

Pat joined IBM in 1984 and has held a variety of executive

and management positions across the company, including vice

president of Enterprise On Demand Transformation and Infor-

mation Technology and general manager of Engineering and

Technology Services. Pat holds a bachelor of science in electri-

cal engineering from the University of Notre Dame and a master

of business administration from Queens University of Charlotte.

Pat Toole

218 MEET OUR SOURCES

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Clifton (Clif) Triplett was named vice

president and CIO of Baker in 2008. He

joined the company from Motorola, where

he served as VP and CIO of the Network

and Enterprise Group, and most recently as

VP, Global Services. Prior to that, he held a

variety of IT leadership roles with General

Motors, Allied Signal, and Entergy Services.

He holds a degree in engineering from the U.S. Military

Academy and a master’s degree in computer information sys-

tems from Boston University. Clif is also a member of the

executive board for the School of Engineering at Southern

Methodist University and is a member of ComputerWorld ’s

Premier 100 IT Leaders for 2010.

Joe Weinman leads a global team focused

on strategy and industry solutions for the

communications, media, and entertainment

verticals in HP’s Worldwide Industry Solu-

tions organization. He is a longtime veteran

of the industry, having held positions of in-

creasing responsibility at the world’s largest

telecommunications company, and he is a

frequent keynoter, a prolific inventor, and

an author/blogger. Joe is a well-known cloud computing

evangelist, creating ‘‘Cloudonomics’’ at the intersection of

cloud computing, ROI/business value, and economics.

Clif Triplett

Joe WeinmanBob Rannellsphotography

MEET OUR SOURCES 219

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RECOMMENDED READING

Barlow, Mike, and Michael Minelli. Partnering with the CIO: The

Future of IT Sales Seen Through the Eyes of Key Decision Makers.

Hoboken, NJ: John Wiley & Sons, 2008.

Barlow, Mike, and David B. Thomas. The Executive’s Guide to

Enterprise Social Media Strategy: How Social Networks Are Radi-

cally Transforming Your Business. Hoboken, NJ: John Wiley &

Sons, 2011.

Benioff, Marc. Behind the Cloud: The Untold Story of How

Salesforce.com Went from Idea to Billion-dollar Company and

Revolutionized an Industry. San Francisco: Jossey-Bass, 2009.

Broadbent, Marianne, and Ellen S. Kitzis. The New CIO Leader:

Setting the Agenda and Delivering Results. Boston: Harvard Busi-

ness School Press, 2005.

Collins, Jim. Good to Great: Why Some Companies Make the Leap . . .

and Others Don’t. New York: HarperBusiness, 2001.

Covey, Stephen R. The 7 Habits of Highly Effective People: Powerful

Lessons in Personal Change. New York: Free Press, 1989, 2004.

Deming, W. Edwards. The New Economy for Industry, Government,

Education. Cambridge, MA: MIT Center for Advanced Educa-

tional Services, 1994.

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BABOUT01 11/14/2011 15:22:51 Page 225

ABOUT THE AUTHOR

Hunter Muller is president and CEO of HMG Strategy LLC,

a global IT strategy consulting firm based in Westport,

Connecticut. Mr. Muller has nearly three decades of experi-

ence in business strategy consulting. His primary focus is

IT organization development, leadership, and business

alignment. His concepts and programs have been used

successfully by premier corporations worldwide to improve

executive performance, enhance collaboration, elevate the

role of IT, and align enterprise strategy across the topmost

levels of management. He lives in Fairfield, Connecticut,

with his wife and their two children. For additional

information, please contact Hunter directly via e-mail at

hunterm@hmgstrategy.com.

225

BABOUT01 11/14/2011 15:22:51 Page 226

BABOUT02 11/05/2011 14:13:25 Page 227

ABOUT HMG STRATEGY LLC

HMG Strategy LLC is the fastest-growing thought leadership

organization dedicated to empowering chief information offi-

cers with leadership, management, and technology support

and advice through an extensive network of the world’s most

successful IT leaders.

The firm’s unique CIO Executive Leadership Series offers

unique event experiences to build relationships with peers

and gain the latest insights and best practices for driving

increased business value through the use of information

technology.

HMG Strategy events enable IT leaders to leverage the

power of an extensive network of more than 10,000 highly

talented CIOs and senior executives from multiple sectors of

the global economy. These events raise thought leadership,

knowledge sharing, and networking to the highest levels.

Additionally, the firm’s partnership with the world’s leading

executive search firms provides IT leaders with invaluable

insights and opportunities for career advancement. For addi-

t ional i nformat ion, pl ease visit ww w.hmg str ategy.com or

send an e-mail to hunterm@hmgstrategy.com.

227

BABOUT02 11/05/2011 14:13:25 Page 228

BINDEX 11/17/2011 12:50:51 Page 229

INDEX

Accenture, 147

Actuarial data, 38

Adduci, Rich, 33–35

Akio Toyoda, 109

Alliances, 111, 115

Amazon, 65

American Customer

Satisfaction Index, 40

Amylin Pharmaceuticals, 132,

158

Andersen Consulting, 96

AT&T, 154

Automation, 42

Avande, 147, 149

Avaya, 49

Avnet, 63–64

Avon Products, 100–103

Baez, Ram�on, 57–60

Baker Hughes, 173

Bankcard Technologies,

87

Bayer Corporation, 183

Bhusri, Aneel, 105–106

Blake, Mike, 152–154

Blalock, Becky, 39, 40–41,

42–44

Boehringer-Ingelheim, 183

Boeing Company, 53–54

Boeing Commercial

Airlines, 53

Boeing Defense, Space &

Security, 53

Bonner, Brian, 69–71

Boston Scientific, 33–35,

35

Brock, John, 98

Business-to-business (B2B),

51–52, 64

Business-to-consumer

(B2C), 64

BYOD (bring your own

device), 48

Cannibalization, 65

Capital Markets Technology,

87

Carr, Nicholas, 19–20, 73

Chancellor, Trae, 163–166

Chevron, 12

229

BINDEX 11/17/2011 12:50:51 Page 230

Chief executive officer (CEO)

chief information officer

(CIO) and, 96, 98, 177,

186

expectations of, 21, 183, 185

objectives of, 21

Chief information officer (CIO)

challenges of, 22, 24–25,

34, 90

cloud computing and, 27,

75, 126, 167

commoditization of, 57

credibility and, 14–15

customer management, 51

efficiency of, 47, 49, 50, 118

evolution of, 114

expectations of, 50–52,

68–70, 96–97

importance of, 25

information technology

(IT) and, 6, 7, 13–14, 27

innovation and, 36, 42–44,

47, 49, 51, 118

integration management,

48

leadership in, 13, 30, 35,

49, 116–117, 164–165,

171, 175, 185–186

managing change, 47–48

objectives of, 22

perspectives of, 29–30

priorities of, 22

qualities of, 9, 42, 56–58,

60, 96–97, 121, 172

requirements of, 162–163

resource management, 33–

35

responsibilities of, 5, 7, 13–

14, 19–22, 28, 30, 36, 41,

48, 49, 172, 182–188

risk management and, 35

roles of, 5–6, 6, 12, 19, 40,

50, 52, 54, 56, 57, 66,

114, 118, 162, 179–180,

185–186

service levels and, 30, 147,

166–168

status of, 5

strategic partnerships and,

27–28

transformational CIO, 35,

51, 54, 59, 67, 67–69, 71,

111, 164, 186

transparency and, 15

as ‘‘value enabler,’’ 50

vertical integration and,

27–28

vision of, 41

balance of efficiency, 47–

60

due diligence of, 163–172

pragmatism of, 26

230 INDEX

BINDEX 11/17/2011 12:50:51 Page 231

CIO Insight magazine, 111

CIO magazine, 111, 184

Clinton, Hillary, 76

Cloud computing

architecture of, 10

assumptions of, 174

benefits of, 12, 76–78, 124–

125, 141, 167, 180–182,

184, 186–188

capabilities of, 106

chief executive officer

(CEO) and, 177

chief information officer

(CIO) and, 27, 75, 126,

176

cloud migration, 81, 158,

172

‘‘cloudonomics,’’ 82

community clouds,

144–145

concerns of, 29, 166–167

costs of, 105–106

disaster recovery plans,

168, 184–185

ecosystems, 27, 99, 123,

145

emergence of, 81

evolution of, 140, 187–188

expectations of, 104, 152

external analysis of,

168–169, 170

governance of, 162–163,

167

human resources informa-

tion system (HRIS), 137

hybrid clouds, 144–145

hybrid clouds and,

184–185

implementation of, 138–140

importance of, 58

information technology

(IT) and, 11–12, 27, 73,

75, 83, 122, 134–135,

141–142, 148–149, 157,

164, 185, 187

innovation and, 86, 141

licensing and, 172

new-product development

and, 86

nomenclature of, 174

operating costs of, 171

private clouds, 75, 142,

144–145, 150–151, 166,

185

private information and, 11

public clouds, 11, 72–77,

144–145, 150–151, 184,

185

regulations and, 138

resource management

and, 174

roles of, 78

INDEX 231

BINDEX 11/17/2011 12:50:51 Page 232

Cloud computing (Continued )

scalability of, 123, 139,

158, 169

security and, 29, 146, 154,

166, 174

service level agreements

(SLA), 168

service request manage-

ment, 158

solutions and, 20

strategies of, 81, 133–135,

151, 160–161, 170, 172,

174, 180, 188

technology of, 10, 21

Toyota Motor Corporation

and, 110–111

trends in, 170

types of, 142–145

valuation of, 72

vendors, 19, 123–124

‘‘Z cloud’’ private cloud,

75

Cloud Computing and SOA

Convergence in Your

Enterprise, 127, 144

Cloudonomics, 72

Coca-Cola Enterprises, 95–98

Colgate-Palmolive, 96

Colisto, Nicholas, 183–185,

185

Collins, Jim, 71

Computerworld, 184, 41, 43,

111

Compuware Corporation,

28–29

Cooper, Barbra, 109–117,

119–122

Crawford, Tim, 66–67

CRM, 123, 149, 184

CSC, 154

Customer management

process, 51

Cyber security, 40

Data security, 52

Davis, Martin, 87–90

Disaster recovery plans, 168,

184–185

Disney, 56

Diversified Search, 166

Dockers, 123

Duffield, Dave, 105–106

Duke University, 69

E-commerce, 63–64, 77, 125

Ecosystems, 27, 99, 123, 145

EM-PACT, 43

Enterprise data centers, 73, 137

Enterprise resource planning

(ERP), 5, 5–6, 96, 116,

123, 125

implementation of, 180–182

232 INDEX

BINDEX 11/17/2011 12:50:51 Page 233

Facebook, 26, 97, 110, 123,

125–126

Fellow of the International

Women’s Forum Leader-

ship Foundation, 41

First Data Corp, 152

Flextronics, 103

Fortune, 40

Fortune 500, 22, 29, 100, 179

Fortune Global 500, 103

Framework selection, 157

‘‘Free time compression,’’

76

Freeport-McMoRan Copper

& Gold, 179

FUD (fear, uncertainty, and

doubt), 171

General Motors, 56

Georgia CIO Leadership

Association, 41

Georgia Power, 41

Global economy, 7, 41, 66,

134, 187

Global markets, 26, 28, 37,

54, 77, 117

Global recession, 37

Global Upstream, 12

Gold, Stephen, 49

Good to Great, 71

Google, 28, 63, 77, 123, 143

Hackney, Allan, 36–39

Hammonds, Kim, 53–54

Hancock, John, 36–39

Hartman, Tyson, 149–150

Harvard Business Review, 19,

84

Harvard University, 40

Hedgehog Concept, 71

Herlihy, Donagh, 100–103

Hewlett-Packard, 72

HGM Strategy, 8

Hill, John, 138–140, 157,

162

Hillman, Mark, 28–30

Hovnanian Enterprises, Inc,

183, 184

Human resources informa-

tion system (HRIS),

136–137

Hyatt Hotels Corp, 152–154

Hyperion Solutions, 183

IBM, 81–83, 99, 145–147

IBM Research, 142

Information Services

Architecture and

Administration, 87

Information technology (IT)

architecture of, 56

budget model, 160

challenges of, 90, 113

INDEX 233

BINDEX 11/17/2011 12:50:51 Page 234

Information technology (IT)

(Continued )

cloud computing and,

11–12, 27, 73, 75, 83,

122, 134–135, 141,

148–149, 154, 157, 158,

164, 169–172, 185, 187

commoditization of, 19, 124

communication within, 57

consolidation of, 148–149

creativity within, 37–38

cyclical nature of, 22–24

developers, 11

disaster recovery plans,

168, 184–185

ecosystems, 27, 99

efficiency of, 22–24, 42,

141, 148–149, 153

enterprise data centers

and, 73

evolution of, 89, 95,

114–117, 175–176,

187–188

expectations of, 60, 96

governance of, 167,

183–184

growth strategies and, 23

hybrid clouds and, 145

importance of, 25

innovation and, 33–35, 59,

120–121, 136, 141

integration management,

98

leadership in, 30, 33, 112,

118–119, 169–172, 179

nature of, 50–51

objectives of, 10, 24, 30

organization of, 10

productivity and, 60

refresh cycle, 48

requirements of, 65

resource management,

157, 160–161

roles of, 7, 54, 59

security and, 22–24, 29,

154

strategies of, 27–28, 40, 49,

67–68, 160–161, 167

transformational strategy

for, 67–68

vendors and, 11, 99

vertical integration and,

27–28

consumerization of, 26

due diligence regarding,

163–172

Infrastructure-as-a-service

(IaaS), 20, 122, 143,

149–150, 169

Innovation

cloud computing and, 86,

141–142

234 INDEX

BINDEX 11/17/2011 12:50:51 Page 235

culture of, 39, 42–44

importance of, 51

incentivization of, 42–44, 44

information technology

(IT) and, 59, 120–121,

136

operational efficiency, 59

processes, 115

as strategy, 117–119

Integration, challenges of, 87

Intellectual property, 44

iPad, 11

iPhone, 52

Java, 105

Johnson, Clarence ‘‘Kelly’’ L.,

85

Kaiser Permanente, 152

Kaizen, 117

Kimberly-Clark, 57, 60

Konica-Minolta Business So-

lutions USA, 66

Korn/Ferry International, 185

Krishnan, M. S., 133

Krotowski, Randy, 12–15

Leadership Atlanta, 40

Leadership Georgia, 40

Legacy systems, 5

Leng, Tony, 166, 169–172

Lentz, James E., 119

Levi Strauss & Co., 24, 25,

122, 123, 125–126

Life-cycle management, 23,

24, 157

Linthicum, David S., 127,

143–144

Lockheed Aircraft

Corporation, 85

Lockheed Martin’s Advanced

Development Program,

85

Market perception, 56

Marketing strategies, 63

McGraw-Hill Publishing, 111

McKesson Corporation, 22

McNamara, Mike, 105–106

Medco, 49

Mercer University, 40

Merck, 49

mergers, 87

Microsoft, 56, 99, 111, 147

Naval Postgraduate School,

24

NaviSite, 154

Netflix, 75

New-product development

process, 84–85, 86

NFL, 123

INDEX 235

BINDEX 11/17/2011 12:50:51 Page 236

Nielsen, Tod, 9–12

Nielsen BuzzMetrics, 123

Odinet, Bert, 179–182, 185

On Top of the Cloud, 8–9

Oracle, 154

Peck, Tom, 24–28, 122–126

Pepsi-Cola, 183

Phelps Dodge, 179

Phillips, Steve, 63, 65

Phillpott, Steve, 132–138,

158–161

Platform-as-a-service (PaaS),

20, 122, 143, 150, 164,

169

Polansky, Mark, 185–186

Prahalad, C. K., 133

Priceline.com, 183

Problem solving, 39

Product development cycle,

112

Productivity frontier, 48–49

Project Launchpad, 37–39

Risk management, 35

S&P 500, 28

Salesforce.com, 101, 109,

110–111, 115, 121,

163–164

Scott, Tony, 55–56

Service level agreements

(SLA), 168

Service request management,

139, 142, 147, 158, 163

Sezer, Esat, 95–100

Siemens, 138

Skunk Works, 85–86

Smart Grid, 42

Smoley, Dave, 103–106

SOA, 95, 158, 202

Social networking, 109,

110

Software-as-a-service (SaaS),

20, 75–76, 104, 122, 135,

143, 149–150, 157, 169,

184

Southern Company, 39, 40,

41, 42, 44

Spratt, Randy, 22–24, 47, 69

State University of West

Georgia, 40

Sterling Winthrop, 183

Strategic partnerships,

27–28

Super Bowl, 123

Tablets, 35, 37–38, 48–49, 60,

77, 110, 172

Telephony, 40

Texas Instruments, 69, 70

236 INDEX

BINDEX 11/17/2011 12:50:51 Page 237

The New Age of Innovation:

Driving Cocreated Value

through Global Net-

works, 133

The Transformational CIO,

7, 8, 83, 106

Time Warner Cable, 154

Toole, Pat, 81–83, 161

Toyota Media Service Co.,

111

Toyota Motor Corporation,

109, 117, 119, 121

Toyota Motor Sales USA,

119

Toyota North America, 109

Triplett, Clifton, 173–177

Twitter, 26, 110, 123

U.K. Ministry of Defense, 53

University of Chicago, 152

University of Toyota, 109

U.S. Military Academy at

West Point, 173

U.S. Naval Academy,

24, 132

Vendors, 58–59, 123,

165–166, 182–183

cloud computing and,

123–124

as potential partners, 99

Vertical integration, 27–28

Visual Basic, 105

VMware, 9

Wachovia, 87

Washington Post, 76

web services infrastructure,

158

Weinman, Joe, 72–78

Wells Fargo, 87, 89

Whirlpool, 96

Workday, 105–106, 136, 143

XP-80 Shooting Star, 86

YouTube, 123

‘‘Z cloud’’ private clouds, 75

Ziff Davis, 111

Zynga, 75

INDEX 237